PART III—ITEMS SPECIFICALLY EXCLUDED FROM GROSS INCOME
Amendments
2010—
2009—
2007—
2004—
2003—
2002—
2000—
1997—
1996—
1992—
1990—
1988—
1986—
1984—
1983—
1981—
1980—
1978—
1976—
1969—
1966—
1964—
1958—
No Federal Income Tax on Restitution Received by Victims of the Nazi Regime or Their Heirs or Estates
"(a)
"(1) shall not be included in gross income; and
"(2) shall not be taken into account for purposes of applying any provision of such Code which takes into account excludable income in computing adjusted gross income, including section 86 of such Code (relating to taxation of Social Security benefits).
For purposes of such Code, the basis of any property received by an eligible individual (or the individual's heirs or estate) as part of an excludable restitution payment shall be the fair market value of such property as of the time of the receipt.
"(b)
"(c)
"(1) is payable by reason of the individual's status as an eligible individual, including any amount payable by any foreign country, the United States of America, or any other foreign or domestic entity, or a fund established by any such country or entity, any amount payable as a result of a final resolution of a legal action, and any amount payable under a law providing for payments or restitution of property;
"(2) constitutes the direct or indirect return of, or compensation or reparation for, assets stolen or hidden from, or otherwise lost to, the individual before, during, or immediately after World War II by reason of the individual's status as an eligible individual, including any proceeds of insurance under policies issued on eligible individuals by European insurance companies immediately before and during World War II; or
"(3) consists of interest which is payable as part of any payment or distribution described in paragraph (1) or (2).
"(d)
"(1) escrow accounts or settlement funds established pursuant to the settlement of the action entitled 'In re: Holocaust Victim Assets Litigation,' (E.D.N.Y.) C.A. No. 96–4849,
"(2) funds to benefit eligible individuals or their heirs created by the International Commission on Holocaust Insurance Claims as a result of the Agreement between the Government of the United States of America and the Government of the Federal Republic of Germany concerning the Foundation 'Remembrance, Responsibility, and Future,' dated July 17, 2000, or
"(3) similar funds subject to the administration of the United States courts created to provide excludable restitution payments to eligible individuals (or eligible individuals' heirs or estates).
"(e)
"(1)
"(2)
1 So in original. Does not conform to section catchline.
3 So in original. Two sections 139D have been enacted.
§101. Certain death benefits
(a) Proceeds of life insurance contracts payable by reason of death
(1) General rule
Except as otherwise provided in paragraph (2), subsection (d), subsection (f), and subsection (j), gross income does not include amounts received (whether in a single sum or otherwise) under a life insurance contract, if such amounts are paid by reason of the death of the insured.
(2) Transfer for valuable consideration
In the case of a transfer for a valuable consideration, by assignment or otherwise, of a life insurance contract or any interest therein, the amount excluded from gross income by paragraph (1) shall not exceed an amount equal to the sum of the actual value of such consideration and the premiums and other amounts subsequently paid by the transferee. The preceding sentence shall not apply in the case of such a transfer—
(A) if such contract or interest therein has a basis for determining gain or loss in the hands of a transferee determined in whole or in part by reference to such basis of such contract or interest therein in the hands of the transferor, or
(B) if such transfer is to the insured, to a partner of the insured, to a partnership in which the insured is a partner, or to a corporation in which the insured is a shareholder or officer.
The term "other amounts" in the first sentence of this paragraph includes interest paid or accrued by the transferee on indebtedness with respect to such contract or any interest therein if such interest paid or accrued is not allowable as a deduction by reason of section 264(a)(4).
[(b) Repealed. Pub. L. 104–188, title I, §1402(a), Aug. 20, 1996, 110 Stat. 1789 ]
(c) Interest
If any amount excluded from gross income by subsection (a) is held under an agreement to pay interest thereon, the interest payments shall be included in gross income.
(d) Payment of life insurance proceeds at a date later than death
(1) General rule
The amounts held by an insurer with respect to any beneficiary shall be prorated (in accordance with such regulations as may be prescribed by the Secretary) over the period or periods with respect to which such payments are to be made. There shall be excluded from the gross income of such beneficiary in the taxable year received any amount determined by such proration. Gross income includes, to the extent not excluded by the preceding sentence, amounts received under agreements to which this subsection applies.
(2) Amount held by an insurer
An amount held by an insurer with respect to any beneficiary shall mean an amount to which subsection (a) applies which is—
(A) held by any insurer under an agreement provided for in the life insurance contract, whether as an option or otherwise, to pay such amount on a date or dates later than the death of the insured, and
(B) equal to the value of such agreement to such beneficiary
(i) as of the date of death of the insured (as if any option exercised under the life insurance contract were exercised at such time), and
(ii) as discounted on the basis of the interest rate used by the insurer in calculating payments under the agreement and mortality tables prescribed by the Secretary.
(3) Application of subsection
This subsection shall not apply to any amount to which subsection (c) is applicable.
[(e) Repealed. Pub. L. 98–369, div. A, title IV, §421(b)(2), July 18, 1984, 98 Stat. 794 ]
(f) Proceeds of flexible premium contracts issued before January 1, 1985 payable by reason of death
(1) In general
Any amount paid by reason of the death of the insured under a flexible premium life insurance contract issued before January 1, 1985 shall be excluded from gross income only if—
(A) under such contract—
(i) the sum of the premiums paid under such contract does not at any time exceed the guideline premium limitation as of such time, and
(ii) any amount payable by reason of the death of the insured (determined without regard to any qualified additional benefit) is not at any time less than the applicable percentage of the cash value of such contract at such time, or
(B) by the terms of such contract, the cash value of such contract may not at any time exceed the net single premium with respect to the amount payable by reason of the death of the insured (determined without regard to any qualified additional benefit) at such time.
(2) Guideline premium limitation
For purposes of this subsection—
(A) Guideline premium limitation
The term "guideline premium limitation" means, as of any date, the greater of—
(i) the guideline single premium, or
(ii) the sum of the guideline level premiums to such date.
(B) Guideline single premium
The term "guideline single premium" means the premium at issue with respect to future benefits under the contract (without regard to any qualified additional benefit), and with respect to any charges for qualified additional benefits, at the time of a determination under subparagraph (A) or (E) and which is based on—
(i) the mortality and other charges guaranteed under the contract, and
(ii) interest at the greater of an annual effective rate of 6 percent or the minimum rate or rates guaranteed upon issue of the contract.
(C) Guideline level premium
The term "guideline level premium" means the level annual amount, payable over the longest period permitted under the contract (but ending not less than 20 years from date of issue or not later than age 95, if earlier), computed on the same basis as the guideline single premium, except that subparagraph (B)(ii) shall be applied by substituting "4 percent" for "6 percent".
(D) Computational rules
In computing the guideline single premium or guideline level premium under subparagraph (B) or (C)—
(i) the excess of the amount payable by reason of the death of the insured (determined without regard to any qualified additional benefit) over the cash value of the contract shall be deemed to be not greater than such excess at the time the contract was issued,
(ii) the maturity date shall be the latest maturity date permitted under the contract, but not less than 20 years after the date of issue or (if earlier) age 95, and
(iii) the amount of any endowment benefit (or sum of endowment benefits) shall be deemed not to exceed the least amount payable by reason of the death of the insured (determined without regard to any qualified additional benefit) at any time under the contract.
(E) Adjustments
The guideline single premium and guideline level premium shall be adjusted in the event of a change in the future benefits or any qualified additional benefit under the contract which was not reflected in any guideline single premiums or guideline level premium previously determined.
(3) Other definitions and special rules
For purposes of this subsection—
(A) Flexible premium life insurance contract
The terms "flexible premium life insurance contract" and "contract" mean a life insurance contract (including any qualified additional benefits) which provides for the payment of one or more premiums which are not fixed by the insurer as to both timing and amount. Such terms do not include that portion of any contract which is treated under State law as providing any annuity benefits other than as a settlement option.
(B) Premiums paid
The term "premiums paid" means the premiums paid under the contract less any amounts (other than amounts includible in gross income) to which section 72(e) applies. If, in order to comply with the requirements of paragraph (1)(A), any portion of any premium paid during any contract year is returned by the insurance company (with interest) within 60 days after the end of a contract year—
(i) the amount so returned (excluding interest) shall be deemed to reduce the sum of the premiums paid under the contract during such year, and
(ii) notwithstanding the provisions of section 72(e), the amount of any interest so returned shall be includible in the gross income of the recipient.
(C) Applicable percentage
The term "applicable percentage" means—
(i) 140 percent in the case of an insured with an attained age at the beginning of the contract year of 40 or less, and
(ii) in the case of an insured with an attained age of more than 40 as of the beginning of the contract year, 140 percent reduced (but not below 105 percent) by one percent for each year in excess of 40.
(D) Cash value
The cash value of any contract shall be determined without regard to any deduction for any surrender charge or policy loan.
(E) Qualified additional benefits
The term "qualified additional benefits" means any—
(i) guaranteed insurability,
(ii) accidental death benefit,
(iii) family term coverage, or
(iv) waiver of premium.
(F) Premium payments not disqualifying contract
The payment of a premium which would result in the sum of the premiums paid exceeding the guideline premium limitation shall be disregarded for purposes of paragraph (1)(A)(i) if the amount of such premium does not exceed the amount necessary to prevent the termination of the contract without cash value on or before the end of the contract year.
(G) Net single premium
In computing the net single premium under paragraph (1)(B)—
(i) the mortality basis shall be that guaranteed under the contract (determined by reference to the most recent mortality table allowed under all State laws on the date of issuance),
(ii) interest shall be based on the greater of—
(I) an annual effective rate of 4 percent (3 percent for contracts issued before July 1, 1983), or
(II) the minimum rate or rates guaranteed upon issue of the contract, and
(iii) the computational rules of paragraph (2)(D) shall apply, except that the maturity date referred to in clause (ii) thereof shall not be earlier than age 95.
(H) Correction of errors
If the taxpayer establishes to the satisfaction of the Secretary that—
(i) the requirements described in paragraph (1) for any contract year was not satisfied due to reasonable error, and
(ii) reasonable steps are being taken to remedy the error,
the Secretary may waive the failure to satisfy such requirements.
(I) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this subsection.
(g) Treatment of certain accelerated death benefits
(1) In general
For purposes of this section, the following amounts shall be treated as an amount paid by reason of the death of an insured:
(A) Any amount received under a life insurance contract on the life of an insured who is a terminally ill individual.
(B) Any amount received under a life insurance contract on the life of an insured who is a chronically ill individual.
(2) Treatment of viatical settlements
(A) In general
If any portion of the death benefit under a life insurance contract on the life of an insured described in paragraph (1) is sold or assigned to a viatical settlement provider, the amount paid for the sale or assignment of such portion shall be treated as an amount paid under the life insurance contract by reason of the death of such insured.
(B) Viatical settlement provider
(i) In general
The term "viatical settlement provider" means any person regularly engaged in the trade or business of purchasing, or taking assignments of, life insurance contracts on the lives of insureds described in paragraph (1) if—
(I) such person is licensed for such purposes (with respect to insureds described in the same subparagraph of paragraph (1) as the insured) in the State in which the insured resides, or
(II) in the case of an insured who resides in a State not requiring the licensing of such persons for such purposes with respect to such insured, such person meets the requirements of clause (ii) or (iii), whichever applies to such insured.
(ii) Terminally ill insureds
A person meets the requirements of this clause with respect to an insured who is a terminally ill individual if such person—
(I) meets the requirements of sections 8 and 9 of the Viatical Settlements Model Act of the National Association of Insurance Commissioners, and
(II) meets the requirements of the Model Regulations of the National Association of Insurance Commissioners (relating to standards for evaluation of reasonable payments) in determining amounts paid by such person in connection with such purchases or assignments.
(iii) Chronically ill insureds
A person meets the requirements of this clause with respect to an insured who is a chronically ill individual if such person—
(I) meets requirements similar to the requirements referred to in clause (ii)(I), and
(II) meets the standards (if any) of the National Association of Insurance Commissioners for evaluating the reasonableness of amounts paid by such person in connection with such purchases or assignments with respect to chronically ill individuals.
(3) Special rules for chronically ill insureds
In the case of an insured who is a chronically ill individual—
(A) In general
Paragraphs (1) and (2) shall not apply to any payment received for any period unless—
(i) such payment is for costs incurred by the payee (not compensated for by insurance or otherwise) for qualified long-term care services provided for the insured for such period, and
(ii) the terms of the contract giving rise to such payment satisfy—
(I) the requirements of section 7702B(b)(1)(B), and
(II) the requirements (if any) applicable under subparagraph (B).
For purposes of the preceding sentence, the rule of section 7702B(b)(2)(B) shall apply.
(B) Other requirements
The requirements applicable under this subparagraph are—
(i) those requirements of section 7702B(g) and section 4980C which the Secretary specifies as applying to such a purchase, assignment, or other arrangement,
(ii) standards adopted by the National Association of Insurance Commissioners which specifically apply to chronically ill individuals (and, if such standards are adopted, the analogous requirements specified under clause (i) shall cease to apply), and
(iii) standards adopted by the State in which the policyholder resides (and if such standards are adopted, the analogous requirements specified under clause (i) and (subject to section 4980C(f)) standards under clause (ii), shall cease to apply).
(C) Per diem payments
A payment shall not fail to be described in subparagraph (A) by reason of being made on a per diem or other periodic basis without regard to the expenses incurred during the period to which the payment relates.
(D) Limitation on exclusion for periodic payments
For limitation on amount of periodic payments which are treated as described in paragraph (1), see section 7702B(d).
(4) Definitions
For purposes of this subsection—
(A) Terminally ill individual
The term "terminally ill individual" means an individual who has been certified by a physician as having an illness or physical condition which can reasonably be expected to result in death in 24 months or less after the date of the certification.
(B) Chronically ill individual
The term "chronically ill individual" has the meaning given such term by section 7702B(c)(2); except that such term shall not include a terminally ill individual.
(C) Qualified long-term care services
The term "qualified long-term care services" has the meaning given such term by section 7702B(c).
(D) Physician
The term "physician" has the meaning given to such term by section 1861(r)(1) of the Social Security Act (
(5) Exception for business-related policies
This subsection shall not apply in the case of any amount paid to any taxpayer other than the insured if such taxpayer has an insurable interest with respect to the life of the insured by reason of the insured being a director, officer, or employee of the taxpayer or by reason of the insured being financially interested in any trade or business carried on by the taxpayer.
(h) Survivor benefits attributable to service by a public safety officer who is killed in the line of duty
(1) In general
Gross income shall not include any amount paid as a survivor annuity on account of the death of a public safety officer (as such term is defined in section 1204 of the Omnibus Crime Control and Safe Streets Act of 1968) killed in the line of duty—
(A) if such annuity is provided, under a governmental plan which meets the requirements of section 401(a), to the spouse (or a former spouse) of the public safety officer or to a child of such officer; and
(B) to the extent such annuity is attributable to such officer's service as a public safety officer.
(2) Exceptions
Paragraph (1) shall not apply with respect to the death of any public safety officer if, as determined in accordance with the provisions of the Omnibus Crime Control and Safe Streets Act of 1968—
(A) the death was caused by the intentional misconduct of the officer or by such officer's intention to bring about such officer's death;
(B) the officer was voluntarily intoxicated (as defined in section 1204 of such Act) at the time of death;
(C) the officer was performing such officer's duties in a grossly negligent manner at the time of death; or
(D) the payment is to an individual whose actions were a substantial contributing factor to the death of the officer.
(i) Certain employee death benefits payable by reason of death of certain terrorist victims or astronauts
(1) In general
Gross income does not include amounts (whether in a single sum or otherwise) paid by an employer by reason of the death of an employee who is a specified terrorist victim (as defined in section 692(d)(4)).
(2) Limitation
(A) In general
Subject to such rules as the Secretary may prescribe, paragraph (1) shall not apply to amounts which would have been payable after death if the individual had died other than as a specified terrorist victim (as so defined).
(B) Exception
Subparagraph (A) shall not apply to incidental death benefits paid from a plan described in section 401(a) and exempt from tax under section 501(a).
(3) Treatment of self-employed individuals
For purposes of paragraph (1), the term "employee" includes a self-employed individual (as defined in section 401(c)(1)).
(4) Relief with respect to astronauts
The provisions of this subsection shall apply to any astronaut whose death occurs in the line of duty.
(j) Treatment of certain employer-owned life insurance contracts
(1) General rule
In the case of an employer-owned life insurance contract, the amount excluded from gross income of an applicable policyholder by reason of paragraph (1) of subsection (a) shall not exceed an amount equal to the sum of the premiums and other amounts paid by the policyholder for the contract.
(2) Exceptions
In the case of an employer-owned life insurance contract with respect to which the notice and consent requirements of paragraph (4) are met, paragraph (1) shall not apply to any of the following:
(A) Exceptions based on insured's status
Any amount received by reason of the death of an insured who, with respect to an applicable policyholder—
(i) was an employee at any time during the 12-month period before the insured's death, or
(ii) is, at the time the contract is issued—
(I) a director,
(II) a highly compensated employee within the meaning of section 414(q) (without regard to paragraph (1)(B)(ii) thereof), or
(III) a highly compensated individual within the meaning of section 105(h)(5), except that "35 percent" shall be substituted for "25 percent" in subparagraph (C) thereof.
(B) Exception for amounts paid to insured's heirs
Any amount received by reason of the death of an insured to the extent—
(i) the amount is paid to a member of the family (within the meaning of section 267(c)(4)) of the insured, any individual who is the designated beneficiary of the insured under the contract (other than the applicable policyholder), a trust established for the benefit of any such member of the family or designated beneficiary, or the estate of the insured, or
(ii) the amount is used to purchase an equity (or capital or profits) interest in the applicable policyholder from any person described in clause (i).
(3) Employer-owned life insurance contract
(A) In general
For purposes of this subsection, the term "employer-owned life insurance contract" means a life insurance contract which—
(i) is owned by a person engaged in a trade or business and under which such person (or a related person described in subparagraph (B)(ii)) is directly or indirectly a beneficiary under the contract, and
(ii) covers the life of an insured who is an employee with respect to the trade or business of the applicable policyholder on the date the contract is issued.
For purposes of the preceding sentence, if coverage for each insured under a master contract is treated as a separate contract for purposes of sections 817(h), 7702, and 7702A, coverage for each such insured shall be treated as a separate contract.
(B) Applicable policyholder
For purposes of this subsection—
(i) In general
The term "applicable policyholder" means, with respect to any employer-owned life insurance contract, the person described in subparagraph (A)(i) which owns the contract.
(ii) Related persons
The term "applicable policyholder" includes any person which—
(I) bears a relationship to the person described in clause (i) which is specified in section 267(b) or 707(b)(1), or
(II) is engaged in trades or businesses with such person which are under common control (within the meaning of subsection (a) or (b) of section 52).
(4) Notice and consent requirements
The notice and consent requirements of this paragraph are met if, before the issuance of the contract, the employee—
(A) is notified in writing that the applicable policyholder intends to insure the employee's life and the maximum face amount for which the employee could be insured at the time the contract was issued,
(B) provides written consent to being insured under the contract and that such coverage may continue after the insured terminates employment, and
(C) is informed in writing that an applicable policyholder will be a beneficiary of any proceeds payable upon the death of the employee.
(5) Definitions
For purposes of this subsection—
(A) Employee
The term "employee" includes an officer, director, and highly compensated employee (within the meaning of section 414(q)).
(B) Insured
The term "insured" means, with respect to an employer-owned life insurance contract, an individual covered by the contract who is a United States citizen or resident. In the case of a contract covering the joint lives of 2 individuals, references to an insured include both of the individuals.
(Aug. 16, 1954, ch. 736,
References in Text
The Omnibus Crime Control and Safe Streets Act of 1968, referred to in subsec. (h), is
Codification
Another section 1084(b) of
Amendments
2006—Subsec. (a)(1).
Subsec. (j).
2003—Subsec. (i).
Subsec. (i)(4).
2002—Subsec. (i).
1997—Subsec. (a)(2).
Subsec. (h).
1996—Subsec. (b).
Subsec. (c).
Subsec. (g).
1986—Subsec. (d)(1).
"(A) any amount determined by such proration, and
"(B) in the case of the surviving spouse of the insured, that portion of the excess of the amounts received under one or more agreements specified in paragraph (2)(A) (whether or not payment of any part of such amounts is guaranteed by the insurer) over the amount determined in subparagraph (A) of this paragraph which is not greater than $1,000 with respect to any insured."
Subsec. (d)(2)(B).
Subsec. (d)(2)(B)(ii).
Subsec. (d)(3), (4).
1984—Subsec. (b)(3)(B).
Subsec. (e).
Subsec. (f).
Subsec. (f)(1).
1982—Subsec. (a)(1).
Subsec. (b)(3).
Subsec. (f).
1976—Subsec. (d)(1).
Subsec. (f).
1974—Subsec. (b)(2)(B).
Subsec. (b)(2)(D).
1969—Subsec. (b)(2)(B)(iii).
1966—Subsec. (b)(2)(D).
1962—Subsec. (b)(2)(B)(ii).
Subsec. (b)(3).
1958—Subsec. (b)(2)(B).
Effective Date of 2006 Amendment
Effective Date of 2003 Amendment
Effective Date of 2002 Amendment
"(1)
"(2)
Effective Date of 1997 Amendment
Section 1084(d) of
Section 1528(b) of
Effective Date of 1996 Amendments
Section 331(b) of
Section 1402(c) of
Effective Date of 1986 Amendment
Section 1001(d) of
Effective Date of 1984 Amendment
Amendment by section 221(b)(2) of
Amendment by section 421(b)(2) of
Amendment by section 713 of
Effective Date of 1982 Amendments
Section 266(c)(1) of
Amendment by section 239 of
Effective Date of 1976 Amendment
Amendment by section 1901(a)(16) of
Amendment by section 1906(b)(13)(A) of
Effective Date of 1974 Amendment
Amendment by section 2005(c)(15) of
Amendment by section 2007(b)(3) of
Effective Date of 1969 Amendment
Amendment by
Effective Date of 1966 Amendment
Amendment by
Effective Date of 1962 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Flexible Premium Contracts Issued During 1984 Which Meet Requirements of Section 7702 Treated as Meeting Requirements of Section 101(f)
Flexible premium contracts issued during 1984 which meet requirements of
Special Rules for Contracts Entered Into Before January 1, 1983
Section 266(c)(2), (3) of
"(2)
"(3)
§102. Gifts and inheritances
(a) General rule
Gross income does not include the value of property acquired by gift, bequest, devise, or inheritance.
(b) Income
Subsection (a) shall not exclude from gross income—
(1) the income from any property referred to in subsection (a); or
(2) where the gift, bequest, devise, or inheritance is of income from property, the amount of such income.
Where, under the terms of the gift, bequest, devise, or inheritance, the payment, crediting, or distribution thereof is to be made at intervals, then, to the extent that it is paid or credited or to be distributed out of income from property, it shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or inheritance of income from property. Any amount included in the gross income of a beneficiary under subchapter J shall be treated for purposes of paragraph (2) as a gift, bequest, devise, or inheritance of income from property.
(c) Employee gifts
(1) In general
Subsection (a) shall not exclude from gross income any amount transferred by or for an employer to, or for the benefit of, an employee.
(2) Cross references
For provisions excluding certain employee achievement awards from gross income, see section 74(c).
For provisions excluding certain de minimis fringes from gross income, see section 132(e).
(Aug. 16, 1954, ch. 736,
Amendments
1986—Subsec. (c).
Effective Date of 1986 Amendment
Amendment by
§103. Interest on State and local bonds
(a) Exclusion
Except as provided in subsection (b), gross income does not include interest on any State or local bond.
(b) Exceptions
Subsection (a) shall not apply to—
(1) Private activity bond which is not a qualified bond
Any private activity bond which is not a qualified bond (within the meaning of section 141).
(2) Arbitrage bond
Any arbitrage bond (within the meaning of section 148).
(3) Bond not in registered form, etc.
Any bond unless such bond meets the applicable requirements of section 149.
(c) Definitions
For purposes of this section and part IV—
(1) State or local bond
The term "State or local bond" means an obligation of a State or political subdivision thereof.
(2) State
The term "State" includes the District of Columbia and any possession of the United States.
(Aug. 16, 1954, ch. 736,
Amendments
1988—Subsec. (b)(6)(N).
"(i)
"(ii)
"(I) the average maturity date of the issue of which the refunding obligation is a part is not later than the average maturity date of the obligations to be refunded by such issue,
"(II) the amount of the refunding obligation does not exceed the outstanding amount of the refunded obligation, and
"(III) the proceeds of the refunding obligation are used to redeem the refunded obligation not later than 90 days after the date of the issuance of the refunding obligation.
For purposes of subclause (I), average maturity shall be determined in accordance with subsection (b)(14)(B)(i)."
Subsec. (c)(7).
1986—
Subsec. (a).
"(1) the obligations of a State, a Territory, or a possession of the United States, or any political subdivision of any of the foregoing, or of the District of Columbia; and
"(2) qualified scholarship funding bonds."
Subsec. (b).
Subsec. (b)(11).
Subsec. (b)(13), (14)(A).
Subsec. (b)(16)(A).
Subsec. (b)(17)(A).
Subsec. (c).
Subsecs. (d) to (g).
Subsec. (h).
Subsec. (h)(2)(A).
Subsec. (h)(5)(A).
Subsecs. (i) to (k).
Subsec. (l).
Subsec. (l)(2)(F).
Subsec. (m).
Subsec. (m)(1).
Subsec. (m)(3)(B).
Subsec. (n).
Subsec. (n)(6)(A), (B)(i).
Subsec. (n)(7)(C)(i).
Subsec. (n)(10)(B).
Subsec. (n)(10)(D).
Subsec. (n)(13).
Subsec. (o).
Subsec. (p).
Subsec. (p)(4).
1984—Subsec. (b)(4).
Subsec. (b)(6)(F)(iv).
Subsec. (b)(6)(N).
Subsec. (b)(6)(P).
Subsec. (b)(7).
Subsec. (b)(13).
Subsec. (b)(15).
Subsec. (b)(16) to (18).
Subsec. (c).
Subsec. (c)(1).
Subsec. (c)(6), (7).
Subsec. (h).
Subsec. (m)(1).
Subsec. (m)(2)(B).
Subsec. (m)(3).
Subsec. (n).
Subsec. (o).
1983—Subsec. (m).
Subsec. (n).
1982—Subsec. (b)(2).
Subsec. (b)(4).
Subsec. (b)(6)(C).
Subsec. (b)(6)(F)(iv).
Subsec. (b)(6)(K) to (O).
Subsec. (b)(9)(A).
Subsec. (b)(10).
Subsec. (b)(11).
Subsec. (b)(12).
Subsec. (b)(13).
Subsec. (b)(14).
Subsec. (h).
Subsec. (j).
Subsec. (k).
Subsec. (l).
Subsec. (m).
1981—Subsec. (b)(4)(I).
Subsec. (b)(9), (10).
Subsecs. (i), (j).
1980—Subsec. (b)(4).
Subsec. (b)(4)(A).
Subsec. (b)(4)(H).
Subsec. (b)(6)(J).
Subsec. (b)(8), (9).
Subsec. (c)(5).
Subsec. (g).
Subsec. (h).
Subsec. (i).
1978—Subsec. (b)(1).
Subsec. (b)(4).
Subsec. (b)(6)(D).
Subsec. (b)(6)(I).
Subsec. (b)(7), (8).
Subsec. (c)(1).
Subsec. (c)(2)(A).
Subsec. (c)(5).
Subsec. (d).
Subsec. (e).
Subsec. (f).
Subsec. (g).
1976—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (e).
Subsec. (f).
1975—Subsecs. (e), (f).
1971—Subsec. (c)(4)(E).
Subsec. (c)(4)(F).
Subsec. (c)(4)(G).
Subsec. (c)(6)(F)(iii).
1969—Subsecs. (d), (e).
1968—Subsec. (c).
Subsec. (c)(6)(D) to (H).
Subsec. (d).
Effective Date of 1988 Amendment
Section 1013(a)(34)(B) of
Effective Date of 1986 Amendment
Amendment by section 1301(a) of
Amendment by sections 1864(b)–(e), 1865(a), 1869(a), (b), 1870, and 1871(b) of
Section 1864(a)(2) of
"(A) Except as provided in subparagraph (B), the amendment made by paragraph (1) [amending this section] shall apply to obligations issued after the date of the enactment of this Act [Oct. 22, 1986] in taxable years ending after such date.
"(B) At the election of the issuer (made at such time and in such manner as the Secretary of the Treasury or his delegate shall prescribe), the amendment made by paragraph (1) shall apply to any obligation issued on or before the date of the enactment of this Act."
Section 1871(a)(2) of
Effective Date of 1984 Amendment
Amendment by section 474(r)(4) of
Section 624(c) of
"(1)
"(2)
Section 626(b) of
"(1)
"(2)
"(A)
Program | Amount of Allowable Obligations |
---|---|
Colorado Student Obligation Bond Authority | $60 million |
Connecticut Higher Education Supplementary Loan Authority | $15.5 million |
District of Columbia | $50 million |
Illinois Higher Education Authority | $70 million |
State of Iowa | $16 million |
Louisiana Public Facilities Authority | $75 million |
Maine Health and Higher Education Facilities Authority | $5 million |
Maryland Higher Education Supplemental Loan Program | $24 million |
Massachusetts College Student Loan Authority | $90 million |
Minnesota Higher Education Coordinating Board | $60 million |
New Hampshire Higher Education and Health Facilities Authority | $39 million |
New York Dormitory Authority | $120 million |
Pennsylvania Higher Education Assistance Agency | $300 million |
Georgia Private Colleges and University Authority | $31 million |
Wisconsin State Building Commission | $60 million |
South Dakota Health and Educational Facilities Authority | $6 million |
"(B)
"(3)
"(4)
"(A) the amount of the refunding obligations may not exceed 101 percent of the aggregate face amount of the refunded obligations, and
"(B) the maturity date of any refunding obligation may not be later than the date which is 17 years after the date on which the refunded obligation was issued (or, in the case of a series of refundings, the date on which the original obligation was issued).
"(5)
"(A) in the same manner in which,
"(B) in the same (or lesser) amount per participant, and
"(C) for the same purposes for which,
such program was operated on March 15, 1984. This subparagraph shall not apply to obligations issued on or after March 15, 1987.
"(6)
"(7)
"(A) on August 15, 1985, a downtown redevelopment authority adopted a resolution to issue obligations for such project,
"(B) before September 26, 1985, the city expended, or entered into binding contracts to expend, more than $10,000,000 in connection with such project, and
"(C) the State supreme court issued a ruling regarding the proposed financing structure for such project on December 11, 1985.
The aggregate face amount of obligations to which this paragraph applies shall not exceed $85,000,000 and such obligations must be issued before January 1, 1992."
Section 631 of
"(a)
"(1)
"(2)
"(A) there was an inducement resolution (or other comparable preliminary approval) for the issue before June 19, 1984, and
"(B) the issue is issued before January 1, 1985.
"(3)
"(A) there was an inducement resolution (or other comparable preliminary approval) for a project before October 19, 1983, by any issuing authority,
"(B) a substantial user of such project notifies the issuing authority within 30 days after the date of the enactment of this Act [July 18, 1984] that it intends to claim its rights under this paragraph, and
"(C) construction of such project began before October 19, 1983, or the substantial user was under a binding contract on such date to incur significant expenditures with respect to such project,
such issuing authority shall allocate its share of the limitation under section 103(n) of such Code for the calendar year during which the obligations were to be issued pursuant to such resolution (or other approval) first to such project. If the amount of obligations required by all projects which meet the requirements of the preceding sentence exceeds the issuing authority's share of the limitation under section 103(n) of such Code, priority under the preceding sentence shall be provided first to those projects for which substantial expenditures were incurred before October 19, 1983. If any issuing authority fails to meet the requirements of this paragraph, the limitation under section 103(n) of such Code for the issuing authority for the calendar year following such failure shall be reduced by the amount of obligations with respect to which such failure occurred.
"(3) [(4)]
"(A) the city council of such city authorized a feasibility study for a convention center on June 10, 1982, and
"(B) on November 4, 1983, a municipal authority acting for such city accepted a proposal for the construction of a facility that is capable of generating steam and electricity through the combustion of municipal waste,
the amendment made by section 621 shall not apply to any issue, issued during 1984, 1985, 1986, or 1987 and substantially all of the proceeds of which are to be used to finance the convention center (or access ramps and parking facilities therefor) described in subparagraph (A) or the facility described in subparagraph (B).
"(b)
"(1)
"(2)
"(A)
"(i) the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983, or
"(ii) with respect to which a binding contract to incur significant expenditures was entered into before October 19, 1983.
"(B)
"(i)
"(ii)
"(C)
"(c)
"(1)
"(2)
"(3)
"(A)
"(i) the original use of which commences with the taxpayer and the construction, reconstruction, or rehabilitation of which began before October 19, 1983, and was completed on or after such date,
"(ii) the original use of which commences with the taxpayer and with respect to which a binding contract to incur significant expenditures for construction, reconstruction, or rehabilitation was entered into before October 19, 1983, and some of such expenditures are incurred on or after such date, or
"(iii) acquired after October 19, 1983, pursuant to a binding contract entered into on or before such date.
"(B)
"(C)
"(4)
"(5)
"(A) paragraph (1) shall be applied by substituting 'April 12, 1984' for 'December 31, 1983', and
"(B) paragraph (3) shall be applied by substituting 'April 13, 1984' for 'October 19, 1983' each place it appears.
"(d)
"(1) Any property described in paragraph (5), (6), or (7) of section 31(g) of this Act [set out as an Effective Date of 1984 Amendment note under
"(2) Any property described in paragraph (4), (8), or (17) of section 31(g) of this Act [set out as an Effective Date of 1984 Amendment note under
"(3) Any property described in paragraph (3) of section 216(b) of the Tax Equity and Fiscal Responsibility Act of 1982 [set out as an Effective Date of 1982 Amendment note under
"(4) Any solid waste disposal facility described in section 103(b)(4)(E) of the Internal Revenue Code of 1986 if—
"(A) a State public authority created pursuant to State legislation which took effect on June 18, 1973, took formal action before October 19, 1983, to commit development funds for such facility.
"(B) such authority issues obligations for any such facility before January 1, 1987, and
"(C) expenditures have been made for the development of any such facility before October 19, 1983.
"(5) Any solid waste disposal facility described in section 103(b)(4)(E) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] if—
"(A) a city government, by resolutions adopted on April 10, 1980, and December 27, 1982, took formal action to authorize the submission of a proposal for a feasibility study for such facility and to authorize the presentation to the Department of the Army (U.S. Army Missile Command) of a proposed agreement to jointly pursue construction and operation of such facility,
"(B) such city government (or a public authority on its behalf) issues obligations for such facility before January 1, 1988, and
"(C) expenditures have been made for the development of such facility before October 19, 1983. Notwithstanding the foregoing provisions of this subsection, the amendments made by section 624 [amending
"(e)
"(1)
"(A) $15,000,000, or
"(B) 20 percent of the estimated cost of the facilities.
"(2)
"(f)
"(1) there was an inducement resolution (or other comparable preliminary approval) for an issue before June 19, 1984, by any issuing authority, and
"(2) such issue is issued before January 1, 1985, the following amendments shall not apply:
"(A) the amendments made by section 623 [amending this section],
"(B) the amendments made by subsections (a) and (b) of section 627 [amending this section] (except to the extent such amendments relate to farm land),
"(C) in the case of a race track, the amendment made by section 627(c) [amending this section], and
"(D) the amendments made by section 628(c) [amending this section]."
[Section 1872(a)(2)(B) of
Effective Date of 1983 Amendment
For effective date of amendment by
Effective Date of 1982 Amendment
Section 214(f) of
"(1)
"(2)
"(3)
"(4)
Section 215(c) of
"(1)
"(A) was issued before July 1, 1982, and
"(B) has a maturity which does not exceed 3 years.
"(2)
Section 217(e) of
Section 219(b) of
Section 221(d) of
"(1)
"(2)
Section 310(d) of
"(1)
"(2) [Repealed.
"(3)
"(4) [Repealed.
Effective Date of 1981 Amendment
Section 811(c) of
Section 812(b)(1) of
Effective Date of 1980 Amendments
For effective date of amendment by
Section 241(d) of
Section 242(c) of
Section 244(b) of
Effective Date of 1978 Amendments
Section 201(c) of
Section 331(c) of
"(1) The amendments made by subsection (a) [amending this section] shall apply to—
"(A) obligations issued after December 31, 1978, in taxable years ending after such date, and
"(B) capital expenditures made after December 31, 1978, with respect to obligations issued before January 1, 1979.
"(2) The amendment made by subsection (b) [amending this section] shall apply to—
"(A) obligations issued after September 30, 1979, in taxable years ending after such date, and
"(B) capital expenditures made after September 30, 1979, with respect to obligations issued after such date."
Section 332(b) of
Section 333(b) of
Section 334(c) of
Section 703(q)(2) of
Amendment by section 703(j)(1) of
Effective Date of 1976 Amendment
Amendment by section 1901(a)(17), (b)(8)(B) of
Amendment by section 1906(b)(13)(A) of
Section 2105(d) of
Amendment by section 2137(d) of
Effective Date of 1975 Amendments
Section 301(b) of
Section 7(b) of
Effective Date of 1971 Amendment
Section 315(c) of
Effective Date of 1969 Amendment
Section 601(b) of
Effective Date of 1968 Amendment
Section 401(b) of
Section 107(b)(1) of
Transfer of Functions
Functions of Commissioner of Education transferred to Secretary of Education by
Coordination of Certain Amendments Made by Pub. L. 97–424 and Pub. L. 97–473
Section 722(b) of
Validation of Sinking Fund Regulations
Section 1013(a)(35) of
"(A) Treasury Regulation section 1.103–13(g) (1979) is hereby enacted into positive law.
"(B)(i) Except as provided in clause (ii), subparagraph (A) shall apply to obligations sold after May 2, 1978, and to which such regulation was provided to apply.
"(ii) Treasury Regulation section 1.103–13(g) (1979) as enacted into positive law by subparagraph (A) shall cease to apply to the extent hereafter modified by the Secretary of the Treasury or his delegate by regulations."
Bonds Issued To Refund Subsection (o)(3) Obligations
Section 1013(c)(15) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Treatment of Certain Guarantees by Farmers Home Administration
Section 1865(b) of
"(1) such guarantee is pursuant to a commitment made by the Farmers Home Administration before July 1, 1984, and
"(2) such obligation is issued to finance a convention center project in Carbondale, Illinois."
Treatment of Certain Obligations Used To Finance Solid Waste Disposal Facility
Section 1865(c) of
"(1)
"(2)
"(A) if—
"(i) a public State authority created pursuant to State legislation which took effect on July 1, 1980, took formal action before October 19, 1983, to commit development funds for such facility,
"(ii) such authority issues obligations for such facility before January 1, 1988, and
"(iii) expenditures have been made for the development of such facility before October 19, 1983,
"(B) if—
"(i) such facility is operated by the South Eastern Public Service Authority of Virginia, and
"(ii) on December 20, 1984, the Internal Revenue Service issued a ruling concluding that a portion of the obligations with respect to such facility would not be treated as federally guaranteed under section 103(h) of such Code by reason of the transitional rule contained in section 631(c)(3)(A)(i) of the Tax Reform Act of 1984 [section 631(c)(3)(A)(i) of
"(C) if—
"(i) a political subdivision of a State took formal action on April 1, 1980, to commit development funds for such facility,
"(ii) such facility has a contract to sell steam to a naval base,
"(iii) such political subdivision issues obligations for such facility before January 1, 1988, and
"(iv) expenditures have been made for the development of such facility before October 19, 1983, or
"(D) if—
"(i) such facility is a thermal transfer facility,
"(ii) is to be built and operated by the Elk Regional Resource Authority, and
"(iii) is to be on land leased from the United States Air Force at Arnold Engineering Development Center near Tullahoma, Tennessee.
"(3)
"(A) In the case of a solid waste disposal facility described in paragraph (2)(A), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $65,000,000.
"(B) In the case of a solid waste disposal facility described in paragraph (2)(B), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $20,000,000. Such amount shall be in addition to the amount permitted under the Internal Revenue Service ruling referred to in paragraph (2)(B)(ii).
"(C) In the case of a solid waste disposal facility described in paragraph (2)(C), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $75,000,000.
"(D) In the case of a solid waste disposal facility described in paragraph (2)(D), the aggregate face amount of obligations to which paragraph (1) applies shall not exceed $25,000,000."
Transitional Rule for Limit on Small Issue Exception
Section 1866 of
"(1) the average maturity of the issue of which the refunding obligation is a part does not exceed the average maturity of the obligations to be refunded by such issue,
"(2) the amount of the refunding obligation does not exceed the amount of the refunded obligation, and
"(3) the proceeds of the refunding obligation are used to redeem the refunded obligation not later than 90 days after the date of the issuance of the refunding obligation.
For purposes of the preceding sentence, the term 'tax-exempt IDB' means any industrial development bond (as defined in section 103(b) of the Internal Revenue Code of 1954 [now 1986]) the interest on which is exempt from tax under section 103(a) of such Code. For purposes of paragraph (1), average maturity shall be determined in accordance with subsection (b)(14)(B)(i) of such Code."
[Section 1018(m)(5) of
Exception From 1984 Amendment for Downtown Muskogee Revitalization Project
Section 1867(b) of
"(1) such obligation is issued before January 1, 1986, or
"(2) such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subsection applies shall not exceed $10,000,000."
Transitional Rules
Section 1869(c)(1)–(4) of
"(1)
"(A) such obligations are not industrial development bonds (within the meaning of section 103(b)(2) of the Internal Revenue Code of 1954 [now 1986]),
"(B) the portion of the proceeds of such obligations so used is attributable to debt approved by voter referendum on or before November 2, 1982,
"(C) the loans to such nonexempt persons were approved by the Board of Estimates of the city of Baltimore on or before October 19, 1983, and
"(D) the aggregate amount of such temporary advances financed or refinanced by such obligations does not exceed $27,000,000.
"(2)
"(3)
"(A) substantially all of the proceeds of the issue are to be used to finance—
"(i) sewer, street, lighting, or other governmental improvements to real property,
"(ii) the acquisition of any interest in real property (by a governmental unit having the power to exercise eminent domain), the preparation of such property for new use, or the transfer of such interest to a private developer, or
"(iii) payments of reasonable relocation costs of prior users of such real property,
"(B) all of the activities described in subparagraph (A) are pursuant to a redevelopment plan adopted by the issuing authority before the issuance of such issue,
"(C) repayment of such issue is secured exclusively by pledges of that portion of any increase in real property tax revenues (or their equivalent) attributable to the redevelopment resulting from the issue (or similar issues), and
"(D) none of the property described in subparagraph (A) is subject to a real property or other tax based on a rate or valuation method which differs from the rate and valuation method applicable to any other similar property located within the jurisdiction of the issuing authority.
"(4)
"(A) such obligation is issued before January 1, 1986,
"(B) such obligation is issued after such date to refund a prior obligation for such project, except that the aggregate amount of obligations to which this subparagraph applies shall not exceed $100,000,000, or
"(C) such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this subparagraph applies shall not exceed $45,000,000.
Subparagraph (B) shall not apply to any obligation issued for the advance refunding of any obligation."
Treatment of Obligations To Finance St. Johns River Power Park
Section 1869(c)(6) of
"(A)
"(i) such obligation is issued before September 27, 1985,
"(ii) such obligation is issued after such date to refund a prior tax exemption obligation for such project, the amount of such obligation does not exceed the outstanding amount of the refunded obligation, and such prior tax exempt obligation is retired not later than the date 30 days after the issuance of the refunding obligation, or
"(iii) such obligation is issued after such date to provide additional financing for such project except that the aggregate amount of obligations to which this clause applies shall not exceed $150,000,000.
Clause (ii) shall not apply to any obligation issued for the advance refunding of any obligation.
"(B)
Certain Public Utilities Treated as Exempted Persons Under Section 103(b); Special Rules for Certain Railroads
Section 629 of
"(a)
"(1) any obligations issued after the date of enactment of this Act [July 18, 1984], and
"(2) any obligations issued after December 31, 1969, which were treated as obligations described in section 103(a) of such Code on the day on which such obligations were issued,
the term 'exempt person' shall include a regulated public utility having any customer service area within a State served by a public power authority which was required as a condition of a Federal Power Commission license specified by an Act of Congress enacted prior to the enactment of section 107 of the Revenue and Expenditure Control Act of 1968 (
"(b)
"(1) substantially all of the proceeds of such obligation are used to acquire railroad track and right-of-way from a railroad involved in a title 11 or similar proceeding (within the meaning of section 368(a)(3)(A) of such Code), and
"(2) the Federal Railroad Administration provides joint financing for such acquisitions.
"(c)
"(1)
"(2)
"(3)
"(A) Cable facilities.
"(B) Small hydroelectric facilities.
"(C) The acquisition of an interest in an electrical generating facility.
"(D) Improvements to existing generating facilities.
"(E) Transmission lines.
"(F) Electric generating facilities."
Treatment of Certain Residential Real Property as Residential Rental Property
Treatment of
Public Approval Requirement in the Case of Public Airport
Section 628(f) of
"(1) the proceeds of any issue are to be used to finance a facility or facilities located on a public airport, and
"(2) the governmental unit issuing such obligations is the owner or operator of such airport,
such governmental unit shall be deemed to be the only governmental unit having jurisdiction over such airport for purposes of subsection (k) of section 103 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] (relating to public approval for industrial development bonds)."
Small Issue Limit in Case of Certain Urban Development Action Grants
Section 628(h) of
"(1) such obligation is part of an issue,
"(2) substantially all of the proceeds of such issue are used to provide facilities with respect to which an urban development action grant under section 119 of the Housing and Community Development Act of 1974 [
"(3) the Secretary of Housing and Urban Development determines, at the time such grant is approved, that the amount of such grant will equal or exceed 5 percent of the total capital expenditures incurred with respect to such facilities."
Student Loan Bonds
"(a)
"(1)
"(A) paragraphs (4) and (5) of section 103(c) of such Code shall not apply, and
"(B) rules similar to section 103(c)(6) shall apply,
to qualified student loan bonds.
"(2)
"(A)
"(B)
"(3)
"(A)
"(B)
"(i)
"(I) the date on which the Higher Education Act of 1965 [
"(II) the date, after the date of enactment of this Act [July 18, 1984], on which the Higher Education Act of 1965 is reauthorized.
"(ii)
"(C)
"(D)
"(i) such commitments are binding on the qualified date, and
"(ii) the amount of such commitments is consistent with practices of the issuer which were in effect on March 15, 1984, with respect to establishing secondary markets for student loans.
"(b)
"(c)
"(1) the status of any other obligations issued, or to be issued, by such issuer as obligations described in section 103(a) of such Code, or
"(2) the status of the issuer as an organization exempt from taxation under such Code.
"(d)
"(e)
"(1)
"(A) the appropriate role of tax-exempt bonds which are issued in connection with the guaranteed student loan program and the PLUS program established under the Higher Education Act of 1965 [
"(B) the appropriate arbitrage rules for such bonds.
"(2)
Obligations Issued To Provide Solid Waste-Energy Producing Facilities
Section 241(b) of
"(1)
"(2)
"(A) substantially all of the fuel for the facility producing steam and electrical energy is derived from solid waste from such solid waste disposal facility,
"(B) both such solid waste disposal facility and the facility producing steam and electrical energy are owned and operated by the authority referred to in paragraph (1), and
"(C) all of the electrical energy and steam produced by the facility for producing steam and electricity which is not used by such facility is sold, for purposes other than resale, to an agency or instrumentality of the United States.
"(3)
"(4)
Alcohol-Producing Facilities
Section 241(c) of
"(1)
"(A) substantially all of the solid waste derived feedstock for such facility is produced at a facility which—
"(i) went into full production in 1977,
"(ii) is located within the limits of a city, and
"(iii) is located in the same metropolitan area as the alcohol-producing facility, and
"(B) before March 1, 1980, there were negotiations between a governmental body and an organization described in section 501(c)(3) of the Internal Revenue Code of 1986 with respect to the utilization of a special process for the production of alcohol at such alcohol-producing facility.
"(2)
"(3)
Hydroelectric Generating Facilities
Section 242(b) of
"(1)
"(A) the facility shall be treated as a qualified hydroelectric generating facility (as defined in section 103(b)(8)(A) of such Code) without regard to clause (ii) of section 48(l)(13)(B) of such Code (relating to maximum generating capacity), and
"(B) the fraction referred to in subparagraph (C) of section 103(b)(8) of such Code shall be deemed to be 1.
"(2)
"(A) it would be a qualified hydroelectric generating facility (as defined in section 103(b)(8)(A) of such Code) if clause (ii) of section 48(l)(13)(B) did not apply,
"(B) it constitutes an expansion of generating capacity at an existing hydroelectric generating facility,
"(C) such facility is located at 1 of 2 dams located in the same county where—
"(i) the rated capacity of the hydroelectric generating facilities at each such dam on October 18, 1979, was more than 750 megawatts,
"(ii) the construction of the first such dam began in 1956, power at such first dam was first generated in 1959, and full power production at such first dam began in 1961, and
"(iii) the construction of the second such dam began in 1959, power at such second dam was first generated in 1963, and full power production at such second dam began in 1964,
"(D) acquisition or construction of the existing facility referred to in subparagraph (B) was financed with the proceeds of an obligation described in section 103(a)(1) of such Code,
"(E) the existing facility is owned and operated by a State, political subdivision of a State, or agency or instrumentality of any of the foregoing,
"(F) no more than 60 percent of the electric power and energy produced by such existing facility and of the qualified hydroelectric generating facility is to be sold to anyone other than an exempt person (within the meaning of section 103(b)(3) of such Code), and
"(G) the agency of the State in which the facility is located which has jurisdiction over water rights had granted, before October 18, 1979, a water right under which expanded power and energy generating capacity for the facility was contemplated."
State Obligations for Renewable Energy Property
Section 243 of
"(a)
"(1)
"(A) the obligations are general obligations of a State,
"(B) the authority for the issuance of the obligations requires that taxes be levied in sufficient amount to provide for the payment of principal and interest on such obligations,
"(C) the amount of such obligations, when added to the sum of the amounts of all such obligations previously issued by the State which are outstanding, does not exceed the smaller of—
"(i) $500,000,000 or
"(ii) one-half of 1 percent of the value of all property in the State,
"(D) such obligations are issued pursuant to a program to provide financing for small scale energy projects which was established by a State the legislature of which, before October 18, 1979, approved a constitutional amendment to provide for such a program, and
"(E) such obligations meet the requirements of paragraph (1) of section 103(h) of the Internal Revenue Code of 1986.
"(2)
"(b)
Disposition of Amounts Generated by Advance Refunding of Certain Governmental Obligations
Section 337 of
"(a)
"(1) shall not cause the refunding obligations out of which the refund profit arose to be treated as arbitrage bonds (within the meaning of section 103(c) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) and
"(2) may be paid without penalty imposed on the issuer of such obligations.
"(b)
"(1) requested in writing a rule by the Internal Revenue Service with respect to the tax consequences of paying refund profit to charitable organizations,
"(2) failed to receive a favorable ruling and did not pay the refund profit to a charitable organization, and
which accounted to the United States for refund profit by direct payment to the United States, or by the purchase of low-interest United States obligations, the Secretary of the Treasury shall pay, out of any amounts in the Treasury not otherwise appropriated, an amount equal to the refund profit for which the State or local government has accounted to the United States. Amounts paid to a State or local government under this subsection shall be distributed to such charitable organizations within 90 days after the date on which the payment is received by the State or local government in the same manner as if the refund profit had not been paid to the United States and met the requirements of subsection (a).
"(c)
"(1)
"(2)
"(3)
"(4)
Transitional Provisions for Industrial Development Bonds Issued Before January 1, 1969
Section 107(b)(2) of
"(A) the issuance of the obligation (or the project in connection with which the proceeds of the obligations are to be used) was authorized or approved by the governing body of the governmental unit issuing the obligation or by the voters of such governmental unit;
"(B) in connection with the issuance of such obligation or with the use of the proceeds to be derived from the sale of such obligation or the property to be acquired or improved with such proceeds, a governmental unit has made a significant financial commitment;
"(C) any person (other than a governmental unit) who will use the proceeds to be derived from the sale of such obligation or the property to be acquired or improved with such proceeds has expended (or has entered into a binding contract to expend) for purposes which are related to the use of such proceeds or property, an amount equal to or in excess of 20 percent of such proceeds; or
"(D) in the case of an obligation issued in conjunction with a project where financial assistance will be provided by a governmental agency concerned with economic development, such agency has approved the project or an application for financial assistance is pending."
[§103A. Repealed. Pub. L. 99–514, title XIII, §1301(j)(1), Oct. 22, 1986, 100 Stat. 2657 ]
Section, added
Effective Date of Repeal
Repeal applicable to bonds issued after Aug. 15, 1986, except as otherwise provided, see sections 1311 to 1318 of
§104. Compensation for injuries or sickness
(a) In general
Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include—
(1) amounts received under workmen's compensation acts as compensation for personal injuries or sickness;
(2) the amount of any damages (other than punitive damages) received (whether by suit or agreement and whether as lump sums or as periodic payments) on account of personal physical injuries or physical sickness;
(3) amounts received through accident or health insurance (or through an arrangement having the effect of accident or health insurance) for personal injuries or sickness (other than amounts received by an employee, to the extent such amounts (A) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (B) are paid by the employer);
(4) amounts received as a pension, annuity, or similar allowance for personal injuries or sickness resulting from active service in the armed forces of any country or in the Coast and Geodetic Survey or the Public Health Service, or as a disability annuity payable under the provisions of section 808 of the Foreign Service Act of 1980; and
(5) amounts received by an individual as disability income attributable to injuries incurred as a direct result of a terroristic or military action (as defined in section 692(c)(2)).
For purposes of paragraph (3), in the case of an individual who is, or has been, an employee within the meaning of section 401(c)(1) (relating to self-employed individuals), contributions made on behalf of such individual while he was such an employee to a trust described in section 401(a) which is exempt from tax under section 501(a), or under a plan described in section 403(a), shall, to the extent allowed as deductions under section 404, be treated as contributions by the employer which were not includible in the gross income of the employee. For purposes of paragraph (2), emotional distress shall not be treated as a physical injury or physical sickness. The preceding sentence shall not apply to an amount of damages not in excess of the amount paid for medical care (described in subparagraph (A) or (B) of section 213(d)(1)) attributable to emotional distress.
(b) Termination of application of subsection (a)(4) in certain cases
(1) In general
Subsection (a)(4) shall not apply in the case of any individual who is not described in paragraph (2).
(2) Individuals to whom subsection (a)(4) continues to apply
An individual is described in this paragraph if—
(A) on or before September 24, 1975, he was entitled to receive any amount described in subsection (a)(4),
(B) on September 24, 1975, he was a member of any organization (or reserve component thereof) referred to in subsection (a)(4) or under a binding written commitment to become such a member,
(C) he receives an amount described in subsection (a)(4) by reason of a combat-related injury, or
(D) on application therefor, he would be entitled to receive disability compensation from the Veterans' Administration.
(3) Special rules for combat-related injuries
For purposes of this subsection, the term "combat-related injury" means personal injury or sickness—
(A) which is incurred—
(i) as a direct result of armed conflict,
(ii) while engaged in extrahazardous service, or
(iii) under conditions simulating war; or
(B) which is caused by an instrumentality of war.
In the case of an individual who is not described in subparagraph (A) or (B) of paragraph (2), except as provided in paragraph (4), the only amounts taken into account under subsection (a)(4) shall be the amounts which he receives by reason of a combat-related injury.
(4) Amount excluded to be not less than veterans' disability compensation
In the case of any individual described in paragraph (2), the amounts excludable under subsection (a)(4) for any period with respect to any individual shall not be less than the maximum amount which such individual, on application therefor, would be entitled to receive as disability compensation from the Veterans' Administration.
(c) Application of prior law in certain cases
The phrase "(other than punitive damages)" shall not apply to punitive damages awarded in a civil action—
(1) which is a wrongful death action, and
(2) with respect to which applicable State law (as in effect on September 13, 1995 and without regard to any modification after such date) provides, or has been construed to provide by a court of competent jurisdiction pursuant to a decision issued on or before September 13, 1995, that only punitive damages may be awarded in such an action.
This subsection shall cease to apply to any civil action filed on or after the first date on which the applicable State law ceases to provide (or is no longer construed to provide) the treatment described in paragraph (2).
(d) Cross references
(1) For exclusion from employee's gross income of employer contributions to accident and health plans, see section 106.
(2) For exclusion of part of disability retirement pay from the application of subsection (a)(4) of this section, see
(Aug. 16, 1954, ch. 736,
References in Text
Section 808 of the Foreign Service Act of 1980, referred to in subsec. (a)(4), is
Amendments
2002—Subsec. (a)(5).
1996—Subsec. (a).
Subsec. (a)(2).
Subsec. (a)(3).
Subsecs. (c), (d).
1989—Subsec. (a).
1983—Subsec. (a)(2).
1980—Subsec. (a)(4).
1976—Subsec. (a)(4).
Subsec. (a)(5).
Subsecs. (b), (c).
1962—Subsec. (a).
1960—Subsec. (a)(4).
Change of Name
Reference to Veterans' Administration deemed to refer to Department of Veterans Affairs pursuant to section 10 of
Coast and Geodetic Survey consolidated with National Weather Bureau in 1965 to form Environmental Science Services Administration by Reorg. Plan No. 2 of 1965, eff. July 13, 1965, 30 FR 8819,
Effective Date of 2002 Amendment
Effective Date of 1996 Amendments
Section 311(c) of
Section 1605(d) of
"(1)
"(2)
Effective Date of 1989 Amendment
Section 7641(b) of
"(1)
"(2)
"(A) under any written binding agreement, court decree, or mediation award in effect on (or issued on or before) July 10, 1989, or
"(B) pursuant to any suit filed on or before July 10, 1989."
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1976 Amendment
Amendment by section 505(b) of
Section 505(e)(2) of
Amendment by section 1901(a)(18)(A) of
Effective Date of 1962 Amendment
Amendment by
Effective Date of 1960 Amendment
Section 56(e) of
Transfer of Functions
Secretary of Health, Education, and Welfare redesignated Secretary of Health and Human Services by
Functions of Public Health Service, Surgeon General of Public Health Service, and all other officers and employees of Public Health Service, and functions of all agencies of or in Public Health Service transferred to Secretary of Health, Education, and Welfare by 1966 Reorg. Plan No. 3, 31 F.R. 8855,
§105. Amounts received under accident and health plans
(a) Amounts attributable to employer contributions
Except as otherwise provided in this section, amounts received by an employee through accident or health insurance for personal injuries or sickness shall be included in gross income to the extent such amounts (1) are attributable to contributions by the employer which were not includible in the gross income of the employee, or (2) are paid by the employer.
(b) Amounts expended for medical care
Except in the case of amounts attributable to (and not in excess of) deductions allowed under section 213 (relating to medical, etc., expenses) for any prior taxable year, gross income does not include amounts referred to in subsection (a) if such amounts are paid, directly or indirectly, to the taxpayer to reimburse the taxpayer for expenses incurred by him for the medical care (as defined in section 213(d)) of the taxpayer, his spouse, his dependents (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and any child (as defined in section 152(f)(1)) of the taxpayer who as of the end of the taxable year has not attained age 27. Any child to whom section 152(e) applies shall be treated as a dependent of both parents for purposes of this subsection.
(c) Payments unrelated to absence from work
Gross income does not include amounts referred to in subsection (a) to the extent such amounts—
(1) constitute payment for the permanent loss or loss of use of a member or function of the body, or the permanent disfigurement, of the taxpayer, his spouse, or a dependent (as defined in section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof), and
(2) are computed with reference to the nature of the injury without regard to the period the employee is absent from work.
[(d) Repealed. Pub. L. 98–21, title I, §122(b), Apr. 20, 1983, 97 Stat. 87 ]
(e) Accident and health plans
For purposes of this section and section 104—
(1) amounts received under an accident or health plan for employees, and
(2) amounts received from a sickness and disability fund for employees maintained under the law of a State or the District of Columbia,
shall be treated as amounts received through accident or health insurance.
(f) Rules for application of section 213
For purposes of section 213(a) (relating to medical, dental, etc., expenses) amounts excluded from gross income under subsection (c) or (d) shall not be considered as compensation (by insurance or otherwise) for expenses paid for medical care.
(g) Self-employed individual not considered an employee
For purposes of this section, the term "employee" does not include an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(h) Amount paid to highly compensated individuals under a discriminatory self-insured medical expense reimbursement plan
(1) In general
In the case of amounts paid to a highly compensated individual under a self-insured medical reimbursement plan which does not satisfy the requirements of paragraph (2) for a plan year, subsection (b) shall not apply to such amounts to the extent they constitute an excess reimbursement of such highly compensated individual.
(2) Prohibition of discrimination
A self-insured medical reimbursement plan satisfies the requirements of this paragraph only if—
(A) the plan does not discriminate in favor of highly compensated individuals as to eligibility to participate; and
(B) the benefits provided under the plan do not discriminate in favor of participants who are highly compensated individuals.
(3) Nondiscriminatory eligibility classifications
(A) In general
A self-insured medical reimbursement plan does not satisfy the requirements of subparagraph (A) of paragraph (2) unless such plan benefits—
(i) 70 percent or more of all employees, or 80 percent or more of all the employees who are eligible to benefit under the plan if 70 percent or more of all employees are eligible to benefit under the plan; or
(ii) such employees as qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of highly compensated individuals.
(B) Exclusion of certain employees
For purposes of subparagraph (A), there may be excluded from consideration—
(i) employees who have not completed 3 years of service;
(ii) employees who have not attained age 25;
(iii) part-time or seasonal employees;
(iv) employees not included in the plan who are included in a unit of employees covered by an agreement between employee representatives and one or more employers which the Secretary finds to be a collective bargaining agreement, if accident and health benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; and
(v) employees who are nonresident aliens and who receive no earned income (within the meaning of section 911(d)(2)) from the employer which constitutes income from sources within the United States (within the meaning of section 861(a)(3)).
(4) Nondiscriminatory benefits
A self-insured medical reimbursement plan does not meet the requirements of subparagraph (B) of paragraph (2) unless all benefits provided for participants who are highly compensated individuals are provided for all other participants.
(5) Highly compensated individual defined
For purposes of this subsection, the term "highly compensated individual" means an individual who is—
(A) one of the 5 highest paid officers,
(B) a shareholder who owns (with the application of section 318) more than 10 percent in value of the stock of the employer, or
(C) among the highest paid 25 percent of all employees (other than employees described in paragraph (3)(B) who are not participants).
(6) Self-insured medical reimbursement plan
The term "self-insured medical reimbursement plan" means a plan of an employer to reimburse employees for expenses referred to in subsection (b) for which reimbursement is not provided under a policy of accident and health insurance.
(7) Excess reimbursement of highly compensated individual
For purposes of this section, the excess reimbursement of a highly compensated individual which is attributable to a self-insured medical reimbursement plan is—
(A) in the case of a benefit available to highly compensated individuals but not to all other participants (or which otherwise fails to satisfy the requirements of paragraph (2)(B)), the amount reimbursed under the plan to the employee with respect to such benefit, and
(B) in the case of benefits (other than benefits described in subparagraph (A) 1 paid to a highly compensated individual by a plan which fails to satisfy the requirements of paragraph (2), the total amount reimbursed to the highly compensated individual for the plan year multiplied by a fraction—
(i) the numerator of which is the total amount reimbursed to all participants who are highly compensated individuals under the plan for the plan year, and
(ii) the denominator of which is the total amount reimbursed to all employees under the plan for such plan year.
In determining the fraction under subparagraph (B), there shall not be taken into account any reimbursement which is attributable to a benefit described in subparagraph (A).
(8) Certain controlled groups, etc.
All employees who are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.
(9) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.
(10) Time of inclusion
Any amount paid for a plan year that is included in income by reason of this subsection shall be treated as received or accrued in the taxable year of the participant in which the plan year ends.
(i) Sick pay under Railroad Unemployment Insurance Act
Notwithstanding any other provision of law, gross income includes benefits paid under section 2(a) of the Railroad Unemployment Insurance Act for days of sickness; except to the extent such sickness (as determined in accordance with standards prescribed by the Railroad Retirement Board) is the result of on-the-job injury.
(j) Special rule for certain governmental plans
(1) In general
For purposes of subsection (b), amounts paid (directly or indirectly) to the taxpayer from an accident or health plan described in paragraph (2) shall not fail to be excluded from gross income solely because such plan, on or before January 1, 2008, provides for reimbursements of health care expenses of a deceased plan participant's beneficiary.
(2) Plan described
An accident or health plan is described in this paragraph if such plan is funded by a medical trust that is established in connection with a public retirement system and that—
(A) has been authorized by a State legislature, or
(B) has received a favorable ruling from the Internal Revenue Service that the trust's income is not includible in gross income under section 115.
(Aug. 16, 1954, ch. 736,
References in Text
Section 2(a) of the Railroad Unemployment Insurance Act, referred to in subsec. (i), is classified to
Amendments
2010—Subsec. (b).
2008—Subsec. (j).
2004—Subsecs. (b), (c)(1).
1989—Subsecs. (h), (i).
1986—Subsec. (d)(5)(C).
Subsecs. (h), (i).
1984—Subsec. (b).
1983—Subsec. (d).
Subsec. (i).
1982—Subsec. (b).
1981—Subsec. (d)(3).
Subsec. (h)(3)(B)(v).
1980—Subsec. (h)(3)(A).
Subsec. (h)(7)(A).
Subsec. (h)(8).
1978—Subsec. (d)(4).
Subsec. (d)(5).
Subsec. (d)(6), (7).
Subsec. (h).
1976—Subsec. (d).
Subsec. (e)(2).
1964—Subsec. (d).
1962—Subsec. (g).
Effective Date of 2008 Amendment
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 1151(c)(2) of
Amendment by section 1301(j)(9) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendments
Section 241(b) of
Amendment by
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1980 Amendments
Amendments by Pub. L.
Amendment by
Effective Date of 1978 Amendment
Section 366(b) of
Section 701(c)(3) of
"(A) The amendments made by paragraphs (1) and (2)(A) [amending this section and provisions set out as a note under this section] shall take effect as if included in section 105(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] as such section was amended by section 505(a) of the Tax Reform Act of 1976.
"(B) The amendments made by paragraph (2)(B) [amending provisions set out as notes under this section] shall take effect as if included in section 301 of the Tax Reduction and Simplification Act of 1977 [
Effective Date of 1976 Amendment
Section 505(f) of
Amendment by section 1901(c)(2) of
Effective Date of 1964 Amendment
Section 205(b) of
Effective Date of 1962 Amendment
Amendment by
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Revocation of Election
Period for Assessing Deficiency
Effective Date of Changes in Exclusion for Sick Pay
"(1) with respect to any taxpayer who makes or has made an election under section 105(d)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] or under section 505(d) of the Tax Reform Act of 1976 [set out below] (as such sections were in effect before the enactment of this Act [May 23, 1977]) for a taxable year beginning in 1976, if such election is not revoked under subsection (c) of this section [set out above], and
"(2) with respect to any taxpayer (other than a taxpayer described in paragraph (1)) who has an annuity starting date at the beginning of a taxable year beginning in 1976 by reason of the amendments made by section 505 of the Tax Reform Act of 1976 [amending this section and
Special Rule for Existing Permanent and Total Disability Cases
Section 505(c) of
"(1) retired before January 1, 1977,
"(2) either retired on disability or was entitled to retire on disability, and
"(3) on January 1, 1976, or January 1, 1977, was permanently and totally disabled (within the meaning of section 105(d)(4) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]),
such individual shall be deemed to have met the requirements of section 105(d)(1)(B) of such Code (as amended by subsection (a) of this section)."
Special Rule for Coordination With Section 72 of This Title
Section 505(d) of
"(1) retired on disability before January 1, 1977, and
"(2) on December 31, 1975, or December 31, 1976, was entitled to exclude any amount with respect to such retirement disability from gross income under section 105(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954],
for purposes of section 72 the annuity starting date shall not be deemed to occur before the beginning of the taxable year in which the taxpayer attains age 65, or before the beginning of an earlier taxable year for which the taxpayer makes an irrevocable election not to seek the benefits of such section 105(d) for such year and all subsequent years."
1 So in original. Probably should be followed by a closing parenthesis.
§106. Contributions by employer to accident and health plans
(a) General rule
Except as otherwise provided in this section, gross income of an employee does not include employer-provided coverage under an accident or health plan.
(b) Contributions to Archer MSAs
(1) In general
In the case of an employee who is an eligible individual, amounts contributed by such employee's employer to any Archer MSA of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan to the extent such amounts do not exceed the limitation under section 220(b)(1) (determined without regard to this subsection) which is applicable to such employee for such taxable year.
(2) No constructive receipt
No amount shall be included in the gross income of any employee solely because the employee may choose between the contributions referred to in paragraph (1) and employer contributions to another health plan of the employer.
(3) Special rule for deduction of employer contributions
Any employer contribution to an Archer MSA, if otherwise allowable as a deduction under this chapter, shall be allowed only for the taxable year in which paid.
(4) Employer MSA contributions required to be shown on return
Every individual required to file a return under section 6012 for the taxable year shall include on such return the aggregate amount contributed by employers to the Archer MSAs of such individual or such individual's spouse for such taxable year.
(5) MSA contributions not part of COBRA coverage
Paragraph (1) shall not apply for purposes of section 4980B.
(6) Definitions
For purposes of this subsection, the terms "eligible individual" and "Archer MSA" have the respective meanings given to such terms by section 220.
(7) Cross reference
For penalty on failure by employer to make comparable contributions to the Archer MSAs of comparable employees, see section 4980E.
(c) Inclusion of long-term care benefits provided through flexible spending arrangements
(1) In general
Effective on and after January 1, 1997, gross income of an employee shall include employer-provided coverage for qualified long-term care services (as defined in section 7702B(c)) to the extent that such coverage is provided through a flexible spending or similar arrangement.
(2) Flexible spending arrangement
For purposes of this subsection, a flexible spending arrangement is a benefit program which provides employees with coverage under which—
(A) specified incurred expenses may be reimbursed (subject to reimbursement maximums and other reasonable conditions), and
(B) the maximum amount of reimbursement which is reasonably available to a participant for such coverage is less than 500 percent of the value of such coverage.
In the case of an insured plan, the maximum amount reasonably available shall be determined on the basis of the underlying coverage.
(d) Contributions to health savings accounts
(1) In general
In the case of an employee who is an eligible individual (as defined in section 223(c)(1)), amounts contributed by such employee's employer to any health savings account (as defined in section 223(d)) of such employee shall be treated as employer-provided coverage for medical expenses under an accident or health plan to the extent such amounts do not exceed the limitation under section 223(b) (determined without regard to this subsection) which is applicable to such employee for such taxable year.
(2) Special rules
Rules similar to the rules of paragraphs (2), (3), (4), and (5) of subsection (b) shall apply for purposes of this subsection.
(3) Cross reference
For penalty on failure by employer to make comparable contributions to the health savings accounts of comparable employees, see section 4980G.
(e) FSA and HRA terminations to fund HSAs
(1) In general
A plan shall not fail to be treated as a health flexible spending arrangement or health reimbursement arrangement under this section or section 105 merely because such plan provides for a qualified HSA distribution.
(2) Qualified HSA distribution
The term "qualified HSA distribution" means a distribution from a health flexible spending arrangement or health reimbursement arrangement to the extent that such distribution—
(A) does not exceed the lesser of the balance in such arrangement on September 21, 2006, or as of the date of such distribution, and
(B) is contributed by the employer directly to the health savings account of the employee before January 1, 2012.
Such term shall not include more than 1 distribution with respect to any arrangement.
(3) Additional tax for failure to maintain high deductible health plan coverage
(A) In general
If, at any time during the testing period, the employee is not an eligible individual, then the amount of the qualified HSA distribution—
(i) shall be includible in the gross income of the employee for the taxable year in which occurs the first month in the testing period for which such employee is not an eligible individual, and
(ii) the tax imposed by this chapter for such taxable year on the employee shall be increased by 10 percent of the amount which is so includible.
(B) Exception for disability or death
Clauses (i) and (ii) of subparagraph (A) shall not apply if the employee ceases to be an eligible individual by reason of the death of the employee or the employee becoming disabled (within the meaning of section 72(m)(7)).
(4) Definitions and special rules
For purposes of this subsection—
(A) Testing period
The term "testing period" means the period beginning with the month in which the qualified HSA distribution is contributed to the health savings account and ending on the last day of the 12th month following such month.
(B) Eligible individual
The term "eligible individual" has the meaning given such term by section 223(c)(1).
(C) Treatment as rollover contribution
A qualified HSA distribution shall be treated as a rollover contribution described in section 223(f)(5).
(5) Tax treatment relating to distributions
For purposes of this title—
(A) In general
A qualified HSA distribution shall be treated as a payment described in subsection (d).
(B) Comparability excise tax
(i) In general
Except as provided in clause (ii), section 4980G shall not apply to qualified HSA distributions.
(ii) Failure to offer to all employees
In the case of a qualified HSA distribution to any employee, the failure to offer such distribution to any eligible individual covered under a high deductible health plan of the employer shall (notwithstanding section 4980G(d)) be treated for purposes of section 4980G as a failure to meet the requirements of section 4980G(b).
(f) Reimbursements for medicine restricted to prescribed drugs and insulin
For purposes of this section and section 105, reimbursement for expenses incurred for a medicine or a drug shall be treated as a reimbursement for medical expenses only if such medicine or drug is a prescribed drug (determined without regard to whether such drug is available without a prescription) or is insulin.
(Aug. 16, 1954, ch. 736,
References in Text
COBRA, referred to in the heading for subsec. (b)(5), probably means the Consolidated Omnibus Budget Reconciliation Act of 1985,
Amendments
2010—Subsec. (f).
2006—Subsec. (e).
2003—Subsec. (d).
2000—Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(3).
Subsec. (b)(4).
Subsec. (b)(6).
Subsec. (b)(7).
1996—
Subsec. (c).
1989—Subsec. (b)(2).
1988—
Subsec. (b)(1).
1986—
Subsec. (a).
Subsec. (b)(1).
Effective Date of 2010 Amendment
Effective Date of 2006 Amendment
Effective Date of 2003 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by section 301(c)(1) of
Amendment by section 321(c)(2) of
Effective Date of 1989 Amendment
Section 7862(c)(1)(C) of
Section 7863 of
Effective Date of 1988 Amendment
Amendment by section 1018(t)(7)(A) of
Amendment by section 3011(b)(1) of
Effective Date of 1986 Amendments
Amendment by section 1114(b)(1) of
Amendment by section 1151(j)(2) of
Section 10001(e) of
"(1)
"(2)
"(A) the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act), or
"(B) January 1, 1987.
For purposes of subparagraph (A), any plan amendment made pursuant to a collective bargaining agreement relating to the plan which amends the plan solely to conform to any requirement added by this section shall not be treated as a termination of such collective bargaining agreement."
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§107. Rental value of parsonages
In the case of a minister of the gospel, gross income does not include—
(1) the rental value of a home furnished to him as part of his compensation; or
(2) the rental allowance paid to him as part of his compensation, to the extent used by him to rent or provide a home and to the extent such allowance does not exceed the fair rental value of the home, including furnishings and appurtenances such as a garage, plus the cost of utilities.
(Aug. 16, 1954, ch. 736,
Amendments
2002—Par. (2).
Effective Date of 2002 Amendment
"(1)
"(2)
"(A) on a return filed before April 17, 2002, limited the exclusion under section 107 of the Internal Revenue Code of 1986 as provided in such amendment, or
"(B) filed a return after April 16, 2002.
"(3)
§108. Income from discharge of indebtedness
(a) Exclusion from gross income
(1) In general
Gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of the taxpayer if—
(A) the discharge occurs in a title 11 case,
(B) the discharge occurs when the taxpayer is insolvent,
(C) the indebtedness discharged is qualified farm indebtedness,
(D) in the case of a taxpayer other than a C corporation, the indebtedness discharged is qualified real property business indebtedness, or
(E) the indebtedness discharged is qualified principal residence indebtedness which is discharged before January 1, 2013.
(2) Coordination of exclusions
(A) Title 11 exclusion takes precedence
Subparagraphs (B), (C), (D), and (E) of paragraph (1) shall not apply to a discharge which occurs in a title 11 case.
(B) Insolvency exclusion takes precedence over qualified farm exclusion and qualified real property business exclusion
Subparagraphs (C) and (D) of paragraph (1) shall not apply to a discharge to the extent the taxpayer is insolvent.
(C) Principal residence exclusion takes precedence over insolvency exclusion unless elected otherwise
Paragraph (1)(B) shall not apply to a discharge to which paragraph (1)(E) applies unless the taxpayer elects to apply paragraph (1)(B) in lieu of paragraph (1)(E).
(3) Insolvency exclusion limited to amount of insolvency
In the case of a discharge to which paragraph (1)(B) applies, the amount excluded under paragraph (1)(B) shall not exceed the amount by which the taxpayer is insolvent.
(b) Reduction of tax attributes
(1) In general
The amount excluded from gross income under subparagraph (A), (B), or (C) of subsection (a)(1) shall be applied to reduce the tax attributes of the taxpayer as provided in paragraph (2).
(2) Tax attributes affected; order of reduction
Except as provided in paragraph (5), the reduction referred to in paragraph (1) shall be made in the following tax attributes in the following order:
(A) NOL
Any net operating loss for the taxable year of the discharge, and any net operating loss carryover to such taxable year.
(B) General business credit
Any carryover to or from the taxable year of a discharge of an amount for purposes for determining the amount allowable as a credit under section 38 (relating to general business credit).
(C) Minimum tax credit
The amount of the minimum tax credit available under section 53(b) as of the beginning of the taxable year immediately following the taxable year of the discharge.
(D) Capital loss carryovers
Any net capital loss for the taxable year of the discharge, and any capital loss carryover to such taxable year under section 1212.
(E) Basis reduction
(i) In general
The basis of the property of the taxpayer.
(ii) Cross reference
For provisions for making the reduction described in clause (i), see section 1017.
(F) Passive activity loss and credit carryovers
Any passive activity loss or credit carryover of the taxpayer under section 469(b) from the taxable year of the discharge.
(G) Foreign tax credit carryovers
Any carryover to or from the taxable year of the discharge for purposes of determining the amount of the credit allowable under section 27.
(3) Amount of reduction
(A) In general
Except as provided in subparagraph (B), the reductions described in paragraph (2) shall be one dollar for each dollar excluded by subsection (a).
(B) Credit carryover reduction
The reductions described in subparagraphs (B), (C), and (G) shall be 331/3 cents for each dollar excluded by subsection (a). The reduction described in subparagraph (F) in any passive activity credit carryover shall be 331/3 cents for each dollar excluded by subsection (a).
(4) Ordering rules
(A) Reductions made after determination of tax for year
The reductions described in paragraph (2) shall be made after the determination of the tax imposed by this chapter for the taxable year of the discharge.
(B) Reductions under subparagraph (A) or (D) of paragraph (2)
The reductions described in subparagraph (A) or (D) of paragraph (2) (as the case may be) shall be made first in the loss for the taxable year of the discharge and then in the carryovers to such taxable year in the order of the taxable years from which each such carryover arose.
(C) Reductions under subparagraphs (B) and (G) of paragraph (2)
The reductions described in subparagraphs (B) and (G) of paragraph (2) shall be made in the order in which carryovers are taken into account under this chapter for the taxable year of the discharge.
(5) Election to apply reduction first against depreciable property
(A) In general
The taxpayer may elect to apply any portion of the reduction referred to in paragraph (1) to the reduction under section 1017 of the basis of the depreciable property of the taxpayer.
(B) Limitation
The amount to which an election under subparagraph (A) applies shall not exceed the aggregate adjusted bases of the depreciable property held by the taxpayer as of the beginning of the taxable year following the taxable year in which the discharge occurs.
(C) Other tax attributes not reduced
Paragraph (2) shall not apply to any amount to which an election under this paragraph applies.
(c) Treatment of discharge of qualified real property business indebtedness
(1) Basis reduction
(A) In general
The amount excluded from gross income under subparagraph (D) of subsection (a)(1) shall be applied to reduce the basis of the depreciable real property of the taxpayer.
(B) Cross reference
For provisions making the reduction described in subparagraph (A), see section 1017.
(2) Limitations
(A) Indebtedness in excess of value
The amount excluded under subparagraph (D) of subsection (a)(1) with respect to any qualified real property business indebtedness shall not exceed the excess (if any) of—
(i) the outstanding principal amount of such indebtedness (immediately before the discharge), over
(ii) the fair market value of the real property described in paragraph (3)(A) (as of such time), reduced by the outstanding principal amount of any other qualified real property business indebtedness secured by such property (as of such time).
(B) Overall limitation
The amount excluded under subparagraph (D) of subsection (a)(1) shall not exceed the aggregate adjusted bases of depreciable real property (determined after any reductions under subsections (b) and (g)) held by the taxpayer immediately before the discharge (other than depreciable real property acquired in contemplation of such discharge).
(3) Qualified real property business indebtedness
The term "qualified real property business indebtedness" means indebtedness which—
(A) was incurred or assumed by the taxpayer in connection with real property used in a trade or business and is secured by such real property,
(B) was incurred or assumed before January 1, 1993, or if incurred or assumed on or after such date, is qualified acquisition indebtedness, and
(C) with respect to which such taxpayer makes an election to have this paragraph apply.
Such term shall not include qualified farm indebtedness. Indebtedness under subparagraph (B) shall include indebtedness resulting from the refinancing of indebtedness under subparagraph (B) (or this sentence), but only to the extent it does not exceed the amount of the indebtedness being refinanced.
(4) Qualified acquisition indebtedness
For purposes of paragraph (3)(B), the term "qualified acquisition indebtedness" means, with respect to any real property described in paragraph (3)(A), indebtedness incurred or assumed to acquire, construct, reconstruct, or substantially improve such property.
(5) Regulations
The Secretary shall issue such regulations as are necessary to carry out this subsection, including regulations preventing the abuse of this subsection through cross-collateralization or other means.
(d) Meaning of terms; special rules relating to certain provisions
(1) Indebtedness of taxpayer
For purposes of this section, the term "indebtedness of the taxpayer" means any indebtedness—
(A) for which the taxpayer is liable, or
(B) subject to which the taxpayer holds property.
(2) Title 11 case
For purposes of this section, the term "title 11 case" means a case under
(3) Insolvent
For purposes of this section, the term "insolvent" means the excess of liabilities over the fair market value of assets. With respect to any discharge, whether or not the taxpayer is insolvent, and the amount by which the taxpayer is insolvent, shall be determined on the basis of the taxpayer's assets and liabilities immediately before the discharge.
[(4) Repealed. Pub. L. 99–514, title VIII, §822(b)(3)(A), Oct. 22, 1986, 100 Stat. 2373 ]
(5) Depreciable property
The term "depreciable property" has the same meaning as when used in section 1017.
(6) Certain provisions to be applied at partner level
In the case of a partnership, subsections (a), (b), (c), and (g) shall be applied at the partner level.
(7) Special rules for S corporation
(A) Certain provisions to be applied at corporate level
In the case of an S corporation, subsections (a), (b), (c), and (g) shall be applied at the corporate level, including by not taking into account under section 1366(a) any amount excluded under subsection (a) of this section.
(B) Reduction in carryover of disallowed losses and deductions
In the case of an S corporation, for purposes of subparagraph (A) of subsection (b)(2), any loss or deduction which is disallowed for the taxable year of the discharge under section 1366(d)(1) shall be treated as a net operating loss for such taxable year. The preceding sentence shall not apply to any discharge to the extent that subsection (a)(1)(D) applies to such discharge.
(C) Coordination with basis adjustments under section 1367(b)(2)
For purposes of subsection (e)(6), a shareholder's adjusted basis in indebtedness of an S corporation shall be determined without regard to any adjustments made under section 1367(b)(2).
(8) Reductions of tax attributes in title 11 cases of individuals to be made by estate
In any case under
(9) Time for making election, etc.
(A) Time
An election under paragraph (5) of subsection (b) or under paragraph (3)(C) of subsection (c) shall be made on the taxpayer's return for the taxable year in which the discharge occurs or at such other time as may be permitted in regulations prescribed by the Secretary.
(B) Revocation only with consent
An election referred to in subparagraph (A), once made, may be revoked only with the consent of the Secretary.
(C) Manner
An election referred to in subparagraph (A) shall be made in such manner as the Secretary may by regulations prescribe.
(10) Cross reference
For provision that no reduction is to be made in the basis of exempt property of an individual debtor, see section 1017(c)(1).
(e) General rules for discharge of indebtedness (including discharges not in title 11 cases or insolvency)
For purposes of this title—
(1) No other insolvency exception
Except as otherwise provided in this section, there shall be no insolvency exception from the general rule that gross income includes income from the discharge of indebtedness.
(2) Income not realized to extent of lost deductions
No income shall be realized from the discharge of indebtedness to the extent that payment of the liability would have given rise to a deduction.
(3) Adjustments for unamortized premium and discount
The amount taken into account with respect to any discharge shall be properly adjusted for unamortized premium and unamortized discount with respect to the indebtedness discharged.
(4) Acquisition of indebtedness by person related to debtor
(A) Treated as acquisition by debtor
For purposes of determining income of the debtor from discharge of indebtedness, to the extent provided in regulations prescribed by the Secretary, the acquisition of outstanding indebtedness by a person bearing a relationship to the debtor specified in section 267(b) or 707(b)(1) from a person who does not bear such a relationship to the debtor shall be treated as the acquisition of such indebtedness by the debtor. Such regulations shall provide for such adjustments in the treatment of any subsequent transactions involving the indebtedness as may be appropriate by reason of the application of the preceding sentence.
(B) Members of family
For purposes of this paragraph, sections 267(b) and 707(b)(1) shall be applied as if section 267(c)(4) provided that the family of an individual consists of the individual's spouse, the individual's children, grandchildren, and parents, and any spouse of the individual's children or grandchildren.
(C) Entities under common control treated as related
For purposes of this paragraph, two entities which are treated as a single employer under subsection (b) or (c) of section 414 shall be treated as bearing a relationship to each other which is described in section 267(b).
(5) Purchase-money debt reduction for solvent debtor treated as price reduction
If—
(A) the debt of a purchaser of property to the seller of such property which arose out of the purchase of such property is reduced,
(B) such reduction does not occur—
(i) in a title 11 case, or
(ii) when the purchaser is insolvent, and
(C) but for this paragraph, such reduction would be treated as income to the purchaser from the discharge of indebtedness,
then such reduction shall be treated as a purchase price adjustment.
(6) Indebtedness contributed to capital
Except as provided in regulations, for purposes of determining income of the debtor from discharge of indebtedness, if a debtor corporation acquires its indebtedness from a shareholder as a contribution to capital—
(A) section 118 shall not apply, but
(B) such corporation shall be treated as having satisfied the indebtedness with an amount of money equal to the shareholder's adjusted basis in the indebtedness.
(7) Recapture of gain on subsequent sale of stock
(A) In general
If a creditor acquires stock of a debtor corporation in satisfaction of such corporation's indebtedness, for purposes of section 1245—
(i) such stock (and any other property the basis of which is determined in whole or in part by reference to the adjusted basis of such stock) shall be treated as section 1245 property,
(ii) the aggregate amount allowed to the creditor—
(I) as deductions under subsection (a) or (b) of section 166 (by reason of the worthlessness or partial worthlessness of the indebtedness), or
(II) as an ordinary loss on the exchange,
shall be treated as an amount allowed as a deduction for depreciation, and
(iii) an exchange of such stock qualifying under section 354(a), 355(a), or 356(a) shall be treated as an exchange to which section 1245(b)(3) applies.
The amount determined under clause (ii) shall be reduced by the amount (if any) included in the creditor's gross income on the exchange.
(B) Special rule for cash basis taxpayers
In the case of any creditor who computes his taxable income under the cash receipts and disbursements method, proper adjustment shall be made in the amount taken into account under clause (ii) of subparagraph (A) for any amount which was not included in the creditor's gross income but which would have been included in such gross income if such indebtedness had been satisfied in full.
(C) Stock of parent corporation
For purposes of this paragraph, stock of a corporation in control (within the meaning of section 368(c)) of the debtor corporation shall be treated as stock of the debtor corporation.
(D) Treatment of successor corporation
For purposes of this paragraph, the term "debtor corporation" includes a successor corporation.
(E) Partnership rule
Under regulations prescribed by the Secretary, rules similar to the rules of the foregoing subparagraphs of this paragraph shall apply with respect to the indebtedness of a partnership.
(8) Indebtedness satisfied by corporate stock or partnership interest
For purposes of determining income of a debtor from discharge of indebtedness, if—
(A) a debtor corporation transfers stock, or
(B) a debtor partnership transfers a capital or profits interest in such partnership,
to a creditor in satisfaction of its recourse or nonrecourse indebtedness, such corporation or partnership shall be treated as having satisfied the indebtedness with an amount of money equal to the fair market value of the stock or interest. In the case of any partnership, any discharge of indebtedness income recognized under this paragraph shall be included in the distributive shares of taxpayers which were the partners in the partnership immediately before such discharge.
(9) Discharge of indebtedness income not taken into account in determining whether entity meets REIT qualifications
Any amount included in gross income by reason of the discharge of indebtedness shall not be taken into account for purposes of paragraphs (2) and (3) of section 856(c).
(10) Indebtedness satisfied by issuance of debt instrument
(A) In general
For purposes of determining income of a debtor from discharge of indebtedness, if a debtor issues a debt instrument in satisfaction of indebtedness, such debtor shall be treated as having satisfied the indebtedness with an amount of money equal to the issue price of such debt instrument.
(B) Issue price
For purposes of subparagraph (A), the issue price of any debt instrument shall be determined under sections 1273 and 1274. For purposes of the preceding sentence, section 1273(b)(4) shall be applied by reducing the stated redemption price of any instrument by the portion of such stated redemption price which is treated as interest for purposes of this chapter.
(f) Student loans
(1) In general
In the case of an individual, gross income does not include any amount which (but for this subsection) would be includible in gross income by reason of the discharge (in whole or in part) of any student loan if such discharge was pursuant to a provision of such loan under which all or part of the indebtedness of the individual would be discharged if the individual worked for a certain period of time in certain professions for any of a broad class of employers.
(2) Student loan
For purposes of this subsection, the term "student loan" means any loan to an individual to assist the individual in attending an educational organization described in section 170(b)(1)(A)(ii) made by—
(A) the United States, or an instrumentality or agency thereof,
(B) a State, territory, or possession of the United States, or the District of Columbia, or any political subdivision thereof,
(C) a public benefit corporation—
(i) which is exempt from taxation under section 501(c)(3),
(ii) which has assumed control over a State, county, or municipal hospital, and
(iii) whose employees have been deemed to be public employees under State law, or
(D) any educational organization described in section 170(b)(1)(A)(ii) if such loan is made—
(i) pursuant to an agreement with any entity described in subparagraph (A), (B), or (C) under which the funds from which the loan was made were provided to such educational organization, or
(ii) pursuant to a program of such educational organization which is designed to encourage its students to serve in occupations with unmet needs or in areas with unmet needs and under which the services provided by the students (or former students) are for or under the direction of a governmental unit or an organization described in section 501(c)(3) and exempt from tax under section 501(a).
The term "student loan" includes any loan made by an educational organization described in section 170(b)(1)(A)(ii) or by an organization exempt from tax under section 501(a) to refinance a loan to an individual to assist the individual in attending any such educational organization but only if the refinancing loan is pursuant to a program of the refinancing organization which is designed as described in subparagraph (D)(ii).
(3) Exception for discharges on account of services performed for certain lenders
Paragraph (1) shall not apply to the discharge of a loan made by an organization described in paragraph (2)(D) if the discharge is on account of services performed for either such organization.
(4) Payments under national health service corps loan repayment program and certain state loan repayment programs
In the case of an individual, gross income shall not include any amount received under section 338B(g) of the Public Health Service Act, under a State program described in section 338I of such Act, or under any other State loan repayment or loan forgiveness program that is intended to provide for the increased availability of health care services in underserved or health professional shortage areas (as determined by such State).
(g) Special rules for discharge of qualified farm indebtedness
(1) Discharge must be by qualified person
(A) In general
Subparagraph (C) of subsection (a)(1) shall apply only if the discharge is by a qualified person.
(B) Qualified person
For purposes of subparagraph (A), the term "qualified person" has the meaning given to such term by section 49(a)(1)(D)(iv); except that such term shall include any Federal, State, or local government or agency or instrumentality thereof.
(2) Qualified farm indebtedness
For purposes of this section, indebtedness of a taxpayer shall be treated as qualified farm indebtedness if—
(A) such indebtedness was incurred directly in connection with the operation by the taxpayer of the trade or business of farming, and
(B) 50 percent or more of the aggregate gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the discharge of such indebtedness occurs is attributable to the trade or business of farming.
(3) Amount excluded cannot exceed sum of tax attributes and business and investment assets
(A) In general
The amount excluded under subparagraph (C) of subsection (a)(1) shall not exceed the sum of—
(i) the adjusted tax attributes of the taxpayer, and
(ii) the aggregate adjusted bases of qualified property held by the taxpayer as of the beginning of the taxable year following the taxable year in which the discharge occurs.
(B) Adjusted tax attributes
For purposes of subparagraph (A), the term "adjusted tax attributes" means the sum of the tax attributes described in subparagraphs (A), (B), (C), (D), (F), and (G) of subsection (b)(2) determined by taking into account $3 for each $1 of the attributes described in subparagraphs (B), (C), and (G) of subsection (b)(2) and the attribute described in subparagraph (F) of subsection (b)(2) to the extent attributable to any passive activity credit carryover.
(C) Qualified property
For purposes of this paragraph, the term "qualified property" means any property which is used or is held for use in a trade or business or for the production of income.
(D) Coordination with insolvency exclusion
For purposes of this paragraph, the adjusted basis of any qualified property and the amount of the adjusted tax attributes shall be determined after any reduction under subsection (b) by reason of amounts excluded from gross income under subsection (a)(1)(B).
(h) Special rules relating to qualified principal residence indebtedness
(1) Basis reduction
The amount excluded from gross income by reason of subsection (a)(1)(E) shall be applied to reduce (but not below zero) the basis of the principal residence of the taxpayer.
(2) Qualified principal residence indebtedness
For purposes of this section, the term "qualified principal residence indebtedness" means acquisition indebtedness (within the meaning of section 163(h)(3)(B), applied by substituting "$2,000,000 ($1,000,000" for "$1,000,000 ($500,000" in clause (ii) thereof) with respect to the principal residence of the taxpayer.
(3) Exception for certain discharges not related to taxpayer's financial condition
Subsection (a)(1)(E) shall not apply to the discharge of a loan if the discharge is on account of services performed for the lender or any other factor not directly related to a decline in the value of the residence or to the financial condition of the taxpayer.
(4) Ordering rule
If any loan is discharged, in whole or in part, and only a portion of such loan is qualified principal residence indebtedness, subsection (a)(1)(E) shall apply only to so much of the amount discharged as exceeds the amount of the loan (as determined immediately before such discharge) which is not qualified principal residence indebtedness.
(5) Principal residence
For purposes of this subsection, the term "principal residence" has the same meaning as when used in section 121.
(i) Deferral and ratable inclusion of income arising from business indebtedness discharged by the reacquisition of a debt instrument
(1) In general
At the election of the taxpayer, income from the discharge of indebtedness in connection with the reacquisition after December 31, 2008, and before January 1, 2011, of an applicable debt instrument shall be includible in gross income ratably over the 5-taxable-year period beginning with—
(A) in the case of a reacquisition occurring in 2009, the fifth taxable year following the taxable year in which the reacquisition occurs, and
(B) in the case of a reacquisition occurring in 2010, the fourth taxable year following the taxable year in which the reacquisition occurs.
(2) Deferral of deduction for original issue discount in debt for debt exchanges
(A) In general
If, as part of a reacquisition to which paragraph (1) applies, any debt instrument is issued for the applicable debt instrument being reacquired (or is treated as so issued under subsection (e)(4) and the regulations thereunder) and there is any original issue discount determined under subpart A of part V of subchapter P of this chapter with respect to the debt instrument so issued—
(i) except as provided in clause (ii), no deduction otherwise allowable under this chapter shall be allowed to the issuer of such debt instrument with respect to the portion of such original issue discount which—
(I) accrues before the 1st taxable year in the 5-taxable-year period in which income from the discharge of indebtedness attributable to the reacquisition of the debt instrument is includible under paragraph (1), and
(II) does not exceed the income from the discharge of indebtedness with respect to the debt instrument being reacquired, and
(ii) the aggregate amount of deductions disallowed under clause (i) shall be allowed as a deduction ratably over the 5-taxable-year period described in clause (i)(I).
If the amount of the original issue discount accruing before such 1st taxable year exceeds the income from the discharge of indebtedness with respect to the applicable debt instrument being reacquired, the deductions shall be disallowed in the order in which the original issue discount is accrued.
(B) Deemed debt for debt exchanges
For purposes of subparagraph (A), if any debt instrument is issued by an issuer and the proceeds of such debt instrument are used directly or indirectly by the issuer to reacquire an applicable debt instrument of the issuer, the debt instrument so issued shall be treated as issued for the debt instrument being reacquired. If only a portion of the proceeds from a debt instrument are so used, the rules of subparagraph (A) shall apply to the portion of any original issue discount on the newly issued debt instrument which is equal to the portion of the proceeds from such instrument used to reacquire the outstanding instrument.
(3) Applicable debt instrument
For purposes of this subsection—
(A) Applicable debt instrument
The term "applicable debt instrument" means any debt instrument which was issued by—
(i) a C corporation, or
(ii) any other person in connection with the conduct of a trade or business by such person.
(B) Debt instrument
The term "debt instrument" means a bond, debenture, note, certificate, or any other instrument or contractual arrangement constituting indebtedness (within the meaning of section 1275(a)(1)).
(4) Reacquisition
For purposes of this subsection—
(A) In general
The term "reacquisition" means, with respect to any applicable debt instrument, any acquisition of the debt instrument by—
(i) the debtor which issued (or is otherwise the obligor under) the debt instrument, or
(ii) a related person to such debtor.
(B) Acquisition
The term "acquisition" shall, with respect to any applicable debt instrument, include an acquisition of the debt instrument for cash, the exchange of the debt instrument for another debt instrument (including an exchange resulting from a modification of the debt instrument), the exchange of the debt instrument for corporate stock or a partnership interest, and the contribution of the debt instrument to capital. Such term shall also include the complete forgiveness of the indebtedness by the holder of the debt instrument.
(5) Other definitions and rules
For purposes of this subsection—
(A) Related person
The determination of whether a person is related to another person shall be made in the same manner as under subsection (e)(4).
(B) Election
(i) In general
An election under this subsection with respect to any applicable debt instrument shall be made by including with the return of tax imposed by
(I) clearly identifies such instrument, and
(II) includes the amount of income to which paragraph (1) applies and such other information as the Secretary may prescribe.
(ii) Election irrevocable
Such election, once made, is irrevocable.
(iii) Pass-thru entities
In the case of a partnership, S corporation, or other pass-thru entity, the election under this subsection shall be made by the partnership, the S corporation, or other entity involved.
(C) Coordination with other exclusions
If a taxpayer elects to have this subsection apply to an applicable debt instrument, subparagraphs (A), (B), (C), and (D) of subsection (a)(1) shall not apply to the income from the discharge of such indebtedness for the taxable year of the election or any subsequent taxable year.
(D) Acceleration of deferred items
(i) In general
In the case of the death of the taxpayer, the liquidation or sale of substantially all the assets of the taxpayer (including in a title 11 or similar case), the cessation of business by the taxpayer, or similar circumstances, any item of income or deduction which is deferred under this subsection (and has not previously been taken into account) shall be taken into account in the taxable year in which such event occurs (or in the case of a title 11 or similar case, the day before the petition is filed).
(ii) Special rule for pass-thru entities
The rule of clause (i) shall also apply in the case of the sale or exchange or redemption of an interest in a partnership, S corporation, or other pass-thru entity by a partner, shareholder, or other person holding an ownership interest in such entity.
(6) Special rule for partnerships
In the case of a partnership, any income deferred under this subsection shall be allocated to the partners in the partnership immediately before the discharge in the manner such amounts would have been included in the distributive shares of such partners under section 704 if such income were recognized at such time. Any decrease in a partner's share of partnership liabilities as a result of such discharge shall not be taken into account for purposes of section 752 at the time of the discharge to the extent it would cause the partner to recognize gain under section 731. Any decrease in partnership liabilities deferred under the preceding sentence shall be taken into account by such partner at the same time, and to the extent remaining in the same amount, as income deferred under this subsection is recognized.
(7) Secretarial authority
The Secretary may prescribe such regulations, rules, or other guidance as may be necessary or appropriate for purposes of applying this subsection, including—
(A) extending the application of the rules of paragraph (5)(D) to other circumstances where appropriate,
(B) requiring reporting of the election (and such other information as the Secretary may require) on returns of tax for subsequent taxable years, and
(C) rules for the application of this subsection to partnerships, S corporations, and other pass-thru entities, including for the allocation of deferred deductions.
(Aug. 16, 1954, ch. 736,
References in Text
Sections 338B(g) and 338I of the Public Health Service Act, referred to in subsec. (f)(4), are classified to sections 254l–1(g) and 254q–1, respectively, of Title 42, The Public Health and Welfare.
Amendments
2010—Subsec. (f)(4).
2009—Subsec. (i).
2008—Subsec. (a)(1)(E).
2007—Subsec. (a)(1)(E).
Subsec. (a)(2)(A).
Subsec. (a)(2)(C).
Subsec. (h).
2004—Subsec. (e)(8).
Subsec. (f)(4).
2002—Subsec. (d)(7)(A).
1998—Subsec. (f)(2).
Subsec. (f)(3).
1997—Subsec. (f)(2).
Subsec. (f)(2)(B).
Subsec. (f)(3).
1996—Subsec. (d)(9)(A).
1993—Subsec. (a)(1)(D).
Subsec. (a)(2)(A).
Subsec. (a)(2)(B).
Subsec. (b)(2)(C) to (E).
Subsec. (b)(2)(F).
Subsec. (b)(2)(G).
Subsec. (b)(3)(B).
Subsec. (b)(4)(B).
Subsec. (b)(4)(C).
Subsec. (c).
Subsec. (d).
Subsec. (d)(6), (7)(A).
Subsec. (d)(7)(B).
Subsec. (d)(9)(A).
Subsec. (e)(6).
Subsec. (e)(8).
"(A) to the issuance of nominal or token shares, or
"(B) with respect to an unsecured creditor, where the ratio of the value of the stock received by such unsecured creditor to the amount of his indebtedness cancelled or exchanged for stock in the workout is less than 50 percent of a similar ratio computed for all unsecured creditors participating in the workout.
Any stock which is disqualified stock (as defined in paragraph (10)(B)(ii)) shall not be treated as stock for purposes of this paragraph."
Subsec. (e)(10), (11).
Subsec. (g)(3)(B).
1990—Subsec. (e)(8).
Subsec. (e)(10)(B).
Subsec. (e)(11).
Subsec. (g)(1)(B).
1988—Subsec. (a)(1)(C).
Subsec. (a)(2).
Subsec. (b).
Subsec. (d).
Subsec. (d)(6).
Subsec. (d)(7)(A).
Subsec. (g).
"(1)
"(2)
"(A) such indebtedness was incurred directly in connection with the operation by the taxpayer of the trade or business of farming, and
"(B) 50 percent or more of the average annual gross receipts of the taxpayer for the 3 taxable years preceding the taxable year in which the discharge of such indebtedness occurs is attributable to the trade or business of farming.
"(3)
1986—Subsec. (a)(1)(C).
Subsec. (a)(2).
Subsec. (b)(2)(B).
"(i) section 30 (relating to credit for increasing research activities), or
"(ii) section 38 (relating to general business credit).
For purposes of this subparagraph, there shall not be taken into account any portion of a carryover which is attributable to the employee stock ownership credit determined under section 41."
Subsec. (b)(2)(E).
Subsec. (b)(3).
Subsec. (c).
Subsec. (d).
Subsec. (d)(4).
Subsec. (d)(6), (7)(A).
Subsec. (d)(7)(B).
Subsec. (d)(9)(A).
Subsec. (e)(7)(A)(ii)(I).
Subsec. (e)(7)(B) to (D).
Subsec. (e)(7)(E), (F).
Subsec. (e)(10)(C).
Subsec. (g).
1984—Subsec. (b)(2)(B).
Subsec. (d)(6).
Subsec. (d)(7) to (10).
Subsec. (e)(10).
Subsec. (e)(10)(C).
Subsec. (f).
1983—Subsec. (b)(2)(B)(v).
Subsec. (e)(7)(A)(iii).
1982—Subsec. (d)(6).
1980—
1976—
1960—Subsec. (b).
1956—Subsec. (b). Act June 29, 1956, substituted "December 31, 1957" for "December 31, 1955".
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
Effective Date of 2004 Amendment
Effective Date of 2002 Amendment
"(1)
"(2)
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Section 225(b) of
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1993 Amendment
Section 13150(d) of
Section 13226(a)(3) of
"(A)
"(B)
Section 13226(b)(4) of
Effective Date of 1990 Amendment
Section 11325(c) of
"(1)
"(2)
"(A) is in a title 11 or similar case (as defined in section 368(a)(3)(A) of the Internal Revenue Code of 1986) which was filed on or before October 9, 1990,
"(B) is pursuant to a written binding contract in effect on October 9, 1990, and at all times thereafter before such issuance or transfer,
"(C) is pursuant to a transaction which was described in documents filed with the Securities and Exchange Commission on or before October 9, 1990, or
"(D) is pursuant to a transaction—
"(i) the material terms of which were described in a written public announcement on or before October 9, 1990,
"(ii) which was the subject of a prior filing with the Securities and Exchange Commission, and
"(iii) which is the subject of a subsequent filing with the Securities and Exchange Commission before January 1, 1991."
Amendment by section 11813(b)(6) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Amendment by section 104(b)(2) of
Amendment by section 231(d)(3)(D) of
Section 405(c) of
Repeal by section 621(e)(1) of
Amendment by section 805(c)(2), (4) of
Section 822(c) of
Amendment by section 1171(b)(4) of
Amendment by section 1847(b)(7) of
Effective Date of 1984 Amendment
Section 59(b)(2) of
Section 59(b)[(c)] of
"(1)
"(2)
"(A) pursuant to a written contract requiring such transfer which was binding on the corporation at all times on June 7, 1984, and at all times after such date but only if the transfer takes place before January 1, 1985, and only if the transferee held the debt at all times on June 7, 1984, or
"(B) pursuant to the exercise of an option to exchange debt for stock but only if such option was in effect at all times on June 7, 1984, and at all times after such date and only if at all times on June 7, 1984, the option and the debt were held by the same person.
"(3)
"(A) such transfer is to another corporation which at all times on June 7, 1984, owned 75 percent or more of the total value of the stock of the corporation making such transfer, and
"(B) immediately after such transfer, the transferee corporation owns 80 percent or more of the total value of the stock of the transferor corporation.
"(4)
"(A) such transfer is covered by a debt restructure agreement entered into by the corporation during November 1983, and
"(B) such agreement was specified in a registration statement filed with the Securities and Exchange Commission by the corporation on March 7, 1984."
Amendment by section 474(r)(5) of
Amendment by section 721(b) of
Section 1076(b) of
Effective Date of 1983 Amendment
Amendment by title I of
Effective Date of 1982 Amendment
Amendment by
Effective Date of 1980 Amendment
Section 7 of
"(a)
"(1)
"(2)
"(A) section 108(b)(2) of the such Code (relating to reduction of tax attributes), as so amended, shall be applied without regard to subparagraphs (A), (B), (C), and (E) thereof, and
"(B) the basis of any property shall not be reduced under section 1017 of such Code (relating to reduction in basis in connection with discharges of indebtedness), as so amended, below the fair market value of such property on the date the debt is discharged.
"(b)
"(c)
"(1)
"(2)
"(A) which occurs after December 31, 1980, and
"(B) which does not occur in a bankruptcy case or similar judicial proceeding (or in a proceeding under the Bankruptcy Act) commenced on or before December 31, 1980.
"(d)
"(1)
"(2)
"(3)
"(4)
"(5)
"(6)
"(e)
"(f)
"(1)
"(2)
"(3)
"(4)
"(g)
"(1)
"(2)
Effective Date of 1976 Amendment
Amendment by section 1951(b)(2)(A) of
Effective Date of 1960 Amendment
Section 1(b) of
Savings Provision
For provisions that nothing in amendment by section 11813 of
Section 1951(b)(2)(B) of
Exclusion of Certain Cancellations of Indebtedness
"(a)
"(1) gross income shall not include any amount which (but for this section) would be includible in gross income by reason of the discharge (in whole or in part) of indebtedness of any taxpayer if the discharge is by reason of the death of an individual incurred as the result of the terrorist attacks against the United States on September 11, 2001, or as the result of illness incurred as a result of an attack involving anthrax occurring on or after September 11, 2001, and before January 1, 2002; and
"(2) return requirements under section 6050P of such Code shall not apply to any discharge described in paragraph (1).
"(b)
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§109. Improvements by lessee on lessor's property
Gross income does not include income (other than rent) derived by a lessor of real property on the termination of a lease, representing the value of such property attributable to buildings erected or other improvements made by the lessee.
(Aug. 16, 1954, ch. 736,
§110. Qualified lessee construction allowances for short-term leases
(a) In general
Gross income of a lessee does not include any amount received in cash (or treated as a rent reduction) by a lessee from a lessor—
(1) under a short-term lease of retail space, and
(2) for the purpose of such lessee's constructing or improving qualified long-term real property for use in such lessee's trade or business at such retail space,
but only to the extent that such amount does not exceed the amount expended by the lessee for such construction or improvement.
(b) Consistent treatment by lessor
Qualified long-term real property constructed or improved in connection with any amount excluded from a lessee's income by reason of subsection (a) shall be treated as nonresidential real property of the lessor (including for purposes of section 168(i)(8)(B)).
(c) Definitions
For purposes of this section—
(1) Qualified long-term real property
The term "qualified long-term real property" means nonresidential real property which is part of, or otherwise present at, the retail space referred to in subsection (a) and which reverts to the lessor at the termination of the lease.
(2) Short-term lease
The term "short-term lease" means a lease (or other agreement for occupancy or use) of retail space for 15 years or less (as determined under the rules of section 168(i)(3)).
(3) Retail space
The term "retail space" means real property leased, occupied, or otherwise used by a lessee in its trade or business of selling tangible personal property or services to the general public.
(d) Information required to be furnished to Secretary
Under regulations, the lessee and lessor described in subsection (a) shall, at such times and in such manner as may be provided in such regulations, furnish to the Secretary—
(1) information concerning the amounts received (or treated as a rent reduction) and expended as described in subsection (a), and
(2) any other information which the Secretary deems necessary to carry out the provisions of this section.
(Added
Prior Provisions
A prior section 110, act Aug. 16, 1954, ch. 736,
Effective Date
Section 1213(e) of
§111. Recovery of tax benefit items
(a) Deductions
Gross income does not include income attributable to the recovery during the taxable year of any amount deducted in any prior taxable year to the extent such amount did not reduce the amount of tax imposed by this chapter.
(b) Credits
(1) In general
If—
(A) a credit was allowable with respect to any amount for any prior taxable year, and
(B) during the taxable year there is a downward price adjustment or similar adjustment,
the tax imposed by this chapter for the taxable year shall be increased by the amount of the credit attributable to the adjustment.
(2) Exception where credit did not reduce tax
Paragraph (1) shall not apply to the extent that the credit allowable for the recovered amount did not reduce the amount of tax imposed by this chapter.
(3) Exception for investment tax credit and foreign tax credit
This subsection shall not apply with respect to the credit determined under section 46 and the foreign tax credit.
(c) Treatment of carryovers
For purposes of this section, an increase in a carryover which has not expired before the beginning of the taxable year in which the recovery or adjustment takes place shall be treated as reducing tax imposed by this chapter.
(d) Special rules for accumulated earnings tax and for personal holding company tax
In applying subsection (a) for the purpose of determining the accumulated earnings tax under section 531 or the tax under section 541 (relating to personal holding companies)—
(1) any excluded amount under subsection (a) allowed for the purposes of this subtitle (other than section 531 or section 541) shall be allowed whether or not such amount resulted in a reduction of the tax under section 531 or the tax under section 541 for the prior taxable year; and
(2) where any excluded amount under subsection (a) was not allowable as a deduction for the prior taxable year for purposes of this subtitle other than of section 531 or section 541 but was allowable for the same taxable year under section 531 or section 541, then such excluded amount shall be allowable if it did not result in a reduction of the tax under section 531 or the tax under section 541.
(Aug. 16, 1954, ch. 736,
Amendments
1986—Subsec. (a).
Subsec. (c).
1984—
1980—Subsec. (d).
1976—Subsec. (b)(4).
Effective Date of 1986 Amendment
Amendment by
Effective Date of 1984 Amendment
Section 171(c) of
Effective Date of 1980 Amendment
Amendment by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§112. Certain combat zone compensation of members of the Armed Forces
(a) Enlisted personnel
Gross income does not include compensation received for active service as a member below the grade of commissioned officer in the Armed Forces of the United States for any month during any part of which such member—
(1) served in a combat zone, or
(2) was hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone; but this paragraph shall not apply for any month beginning more than 2 years after the date of the termination of combatant activities in such zone.
With respect to service in the combat zone designated for purposes of the Vietnam conflict, paragraph (2) shall not apply to any month after January 1978.
(b) Commissioned officers
Gross income does not include so much of the compensation as does not exceed the maximum enlisted amount received for active service as a commissioned officer in the Armed Forces of the United States for any month during any part of which such officer—
(1) served in a combat zone, or
(2) was hospitalized as a result of wounds, disease, or injury incurred while serving in a combat zone; but this paragraph shall not apply for any month beginning more than 2 years after the date of the termination of combatant activities in such zone.
With respect to service in the combat zone designated for purposes of the Vietnam conflict, paragraph (2) shall not apply to any month after January 1978.
(c) Definitions
For purposes of this section—
(1) The term "commissioned officer" does not include a commissioned warrant officer.
(2) The term "combat zone" means any area which the President of the United States by Executive Order designates, for purposes of this section or corresponding provisions of prior income tax laws, as an area in which Armed Forces of the United States are or have (after June 24, 1950) engaged in combat.
(3) Service is performed in a combat zone only if performed on or after the date designated by the President by Executive Order as the date of the commencing of combatant activities in such zone, and on or before the date designated by the President by Executive Order as the date of the termination of combatant activities in such zone; except that June 25, 1950, shall be considered the date of the commencing of combatant activities in the combat zone designated in Executive Order 10195.
(4) The term "compensation" does not include pensions and retirement pay.
(5) The term "maximum enlisted amount" means, for any month, the sum of—
(A) the highest rate of basic pay payable for such month to any enlisted member of the Armed Forces of the United States at the highest pay grade applicable to enlisted members, and
(B) in the case of an officer entitled to special pay under
(d) Prisoners of war, etc.
(1) Members of the Armed Forces
Gross income does not include compensation received for active service as a member of the Armed Forces of the United States for any month during any part of which such member is in a missing status (as defined in
(2) Civilian employees
Gross income does not include compensation received for active service as an employee for any month during any part of which such employee is in a missing status during the Vietnam conflict as a result of such conflict. For purposes of this paragraph, the terms "active service", "employee", and "missing status" have the respective meanings given to such terms by
(3) Period of conflict
For purposes of this subsection, the Vietnam conflict began February 28, 1961, and ends on the date designated by the President by Executive order as the date of the termination of combatant activities in Vietnam. For purposes of this subsection, an individual is in a missing status as a result of the Vietnam conflict if immediately before such status began he was performing service in Vietnam or was performing service in Southeast Asia in direct support of military operations in Vietnam.
(Aug. 16, 1954, ch. 736,
Amendments
1996—
Subsec. (b).
Subsec. (c)(5).
1976—Subsec. (a).
Subsec. (b).
1975—Subsec. (a).
Subsec. (a)(1).
Subsec. (a)(2).
Subsec. (b).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c)(5).
1972—Subsec. (d).
1966—Subsec. (b).
Effective Date of 1975 Amendment
Section 2(c) of
Effective Date of 1972 Amendment
Section 3(a)(1) of
Effective Date of 1966 Amendment
Section 2 of
Sense of Congress Regarding Tax Treatment of Members Receiving Special Pay for Duty Subject to Hostile Fire or Imminent Danger
Sense of Congress Regarding Treatment Under Internal Revenue Code of Members Receiving Hostile Fire or Imminent Danger Special Pay During Contingency Operations
Availability of Certain Tax Benefits for Services as Part of Operation Allied Force
"(a)
"(1) Section 2(a)(3) (relating to special rule where deceased spouse was in missing status).
"(2) Section 112 (relating to the exclusion of certain combat pay of members of the Armed Forces).
"(3) Section 692 (relating to income taxes of members of Armed Forces on death).
"(4) Section 2201 (relating to members of the Armed Forces dying in combat zone or by reason of combat-zone-incurred wounds, etc.).
"(5) Section 3401(a)(1) (defining wages relating to combat pay for members of the Armed Forces).
"(6) Section 4253(d) (relating to the taxation of phone service originating from a combat zone from members of the Armed Forces).
"(7) Section 6013(f)(1) (relating to joint return where individual is in missing status).
"(8) Section 7508 (relating to time for performing certain acts postponed by reason of service in combat zone).
"(b)
"(c)
"(d)
"(1)
"(2)
Treatment of Certain Individuals Performing Services in Certain Hazardous Duty Areas; Effective Date
Section 1 of
"(a)
"(1) Section 2(a)(3) (relating to special rule where deceased spouse was in missing status).
"(2) Section 112 (relating to the exclusion of certain combat pay of members of the Armed Forces).
"(3) Section 692 (relating to income taxes of members of Armed Forces on death).
"(4) Section 2201 (relating to members of the Armed Forces dying in combat zone or by reason of combat-zone-incurred wounds, etc.).
"(5) Section 3401(a)(1) (defining wages relating to combat pay for members of the Armed Forces).
"(6) Section 4253(d) (relating to the taxation of phone service originating from a combat zone from members of the Armed Forces).
"(7) Section 6013(f)(1) (relating to joint return where individual is in missing status).
"(8) Section 7508 (relating to time for performing certain acts postponed by reason of service in combat zone).
"(b)
"(c)
"(d)
"(1)
"(2)
"(e)
"(1)
"(2)
Refund or Credit of Overpayment; Applicable Period
Section 3(a)(2), (3) of
"(2) If refund or credit of any overpayment for any taxable year resulting from the application of the amendment made by the first section of this Act [amending this section] (including interest, additions to the tax, and additional amounts) is prevented at any time before the expiration of the applicable period specified in paragraph (3) by the operation of any law or rule of law, such refund or credit of such overpayment may, nevertheless, be made or allowed if claim therefor is filed before the expiration of such applicable period.
"(3) For purposes of paragraph (2), the applicable period for any individual with respect to any compensation is the period ending on whichever of the following days is the later:
"(A) the day which is one year after the date of the enactment of this Act [Apr. 26, 1972], or
"(B) the day which is 2 years after the date on which it is determined that the individual's missing status (within the meaning of section 112(d) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]) has terminated for purposes of such section 112."
Ex. Ord. No. 10585. Termination of Combatant Activities in Korea
Ex. Ord. No. 10585, Jan. 1, 1955, 20 F.R. 17, provided:
By virtue of the authority vested in me by section 112(c)(3) of the Internal Revenue Code of 1954 [now I.R.C. 1986], January 31, 1955, as of midnight thereof, is hereby designated as the date of termination of combatant activities in the zone comprised of the area described in Executive Order No. 10195 of December 20, 1950 (15 F.R. 9177).
Dwight D. Eisenhower.
Ex. Ord. No. 11216. Designation of Vietnam and Adjacent Waters as Combat Zone
Ex. Ord. No. 11216, Apr. 24, 1965, 30 F.R. 5817, provided:
Pursuant to the authority vested in me by section 112 of the Internal Revenue Code of 1954 [now I.R.C. 1986], I hereby designate, for the purposes of that section, as an area in which Armed Forces of the United States are and have been engaged in combat:
Vietnam, including the waters adjacent thereto within the following-described limits: From a point on the East Coast of Vietnam at the juncture of Vietnam with China southeastward to 21° N Lat., 108°15′ E Long.; thence southward to 18° N Lat., 108°15′ E Long.; thence southeastward to 17°30 N Lat., 111° E Long.; thence southward to 11° N Lat., 111° E Long.; thence southwestward to 7° N Lat., 105° E Long.; thence westward to 7° N Lat., 103° E Long.; thence northward to 9°30′ N Lat., 103° E Long.; thence northeastward to 10°15′ N Lat., 104°27′ E Long.; thence northward to a point on the West Coast of Vietnam at the juncture of Vietnam with Cambodia.
The date of the commencing of combatant activities in such area is hereby designated as January 1, 1964.
Lyndon B. Johnson.
Ex. Ord. No. 12744. Designation of Arabian Peninsula Areas, Airspace, and Adjacent Waters as Combat Zone
Ex. Ord. No. 12744, Jan. 21, 1991, 56 F.R. 2663, provided:
By the authority vested in me as President by the Constitution and the laws of the United States of America, including section 112 of the Internal Revenue Code of 1986 (
—the Persian Gulf
—the Red Sea
—the Gulf of Oman
—that portion of the Arabian Sea that lies north of 10 degrees north latitude and west of 68 degrees east longitude
—the Gulf of Aden
—the total land areas of Iraq, Kuwait, Saudi Arabia, Oman, Bahrain, Qatar, and the United Arab Emirates.
For the purposes of this order, the date of the commencing of combatant activities in such zone is hereby designated as January 17, 1991.
George Bush.
Ex. Ord. No. 13002. Termination of Combat Zone Designation in Vietnam and Waters Adjacent Thereto
Ex. Ord. No. 13002, May 13, 1996, 61 F.R. 24665, provided:
By the authority vested in me as President by the Constitution and the laws of the United States of America, including section 112(c)(3) of the Internal Revenue Code of 1986 (
William J. Clinton.
Ex. Ord. No. 13119. Designation of Federal Republic of Yugoslavia (Serbia/Montenegro), Albania, the Airspace Above, and Adjacent Waters as a Combat Zone
Ex. Ord. No. 13119, April 13, 1999, 64 F.R. 18797, provided:
Pursuant to the authority vested in me as President by the Constitution and laws of the United States of America, including section 112 of the Internal Revenue Code of 1986 (
—The Federal Republic of Yugoslavia (Serbia/Montenegro);
—Albania;
—the Adriatic Sea;
—the Ionian Sea north of the 39th parallel.
For the purposes of this order, I designate March 24, 1999, as the date of the commencement of combatant activities in such zone.
William J. Clinton.
Ex. Ord. No. 13239. Designation of Afghanistan and the Airspace Above as a Combat Zone
Ex. Ord. No. 13239, Dec. 12, 2001, 66 F.R. 64907, provided:
Pursuant to the authority vested in me as President by the Constitution and the laws of the United States of America, including section 112 of the Internal Revenue Code of 1986 (
For purposes of this order, I designate September 19, 2001, as the date of the commencement of combatant activities in such zone.
George W. Bush.
[§113. Repealed. Pub. L. 101–508, title XI, §11801(a)(7), Nov. 5, 1990, 104 Stat. 1388–520 ]
Section, act Aug. 16, 1954, ch. 736,
Savings Provision
For provisions that nothing in repeal by
[§114. Repealed. Pub. L. 108–357, title I, §101(a), Oct. 22, 2004, 118 Stat. 1423 ]
Section, added
A prior section 114, act Aug. 16, 1954, ch. 736,
Effective Date of Repeal
Repeal applicable to transactions after Dec. 31, 2004, see section 101(c) of
Transition Provisions
"(d)
"(1)
"(2)
"(A) For 2005, the applicable percentage shall be 20 percent.
"(B) For 2006, the applicable percentage shall be 40 percent.
"(e)
"(1) was treated as transferred under clause (i) thereof, or
"(2) was acquired during a taxable year to which such election applies and before May 1, 2003, in the ordinary course of its trade or business.
The Secretary of the Treasury (or such Secretary's delegate) may prescribe such regulations as may be necessary to prevent the abuse of the purposes of this subsection.
"[(f) Repealed.
§115. Income of States, municipalities, etc.
Gross income does not include—
(1) income derived from any public utility or the exercise of any essential governmental function and accruing to a State or any political subdivision thereof, or the District of Columbia; or
(2) income accruing to the government of any possession of the United States, or any political subdivision thereof.
(Aug. 16, 1954, ch. 736,
Amendments
1976—
Effective Date of 1976 Amendment
Amendment by
Tax Treatment of State Ownership of Railroad Real Estate Investment Trust
"(a)
"(1) which is a real estate investment trust on the date of the enactment of this Act [Aug. 10, 2005],
"(2) which is a non-operating class III railroad, and
"(3) substantially all of the activities of which consist of the ownership, leasing, and operation by such corporation of facilities, equipment, and other property used by the corporation or other persons for railroad transportation and for economic development purposes for the benefit of the State and its citizens, then, to the extent such activities are of a type which are an essential governmental function within the meaning of section 115 of the Internal Revenue Code of 1986, income derived from such activities by the corporation shall be treated as accruing to the State for purposes of section 115 of such Code.
"(b)
"(1) no gain or loss shall be recognized under section 336 or 337 of such Code, and
"(2) no change in basis of the property of such corporation shall occur, because of any change of status of a corporation to a tax-exempt entity by reason of the application of subsection (a).
"(c)
"(1)
"(A) shall be treated as a State or local bond (within the meaning of section 103(c) of such Code), and
"(B) shall not be treated as a private activity bond (within the meaning of section 103(b)(1) of such Code) solely by reason of the ownership or use of such railroad transportation infrastructure by the corporation.
"(2)
"(d)
"(1)
"(2)
"(3)
"(A) the District of Columbia and any possession of the United States, and
"(B) any authority, agency, or public corporation of a State.
"(e)
"(1)
"(2)
"(A) becomes the owner of all of the voting stock of a corporation described in subsection (a) after December 31, 2003, or
"(B) becomes the owner of all of the outstanding stock of a corporation described in subsection (a) after December 31, 2006."
[§116. Repealed. Pub. L. 99–514, title VI, §612(a), Oct. 22, 1986, 100 Stat. 2250 ]
Section, acts Aug. 16, 1954, ch. 736,
Effective Date of Repeal
Repeal applicable to taxable years beginning after Dec. 31, 1986, see section 612(c) of
§117. Qualified scholarships
(a) General rule
Gross income does not include any amount received as a qualified scholarship by an individual who is a candidate for a degree at an educational organization described in section 170(b)(1)(A)(ii).
(b) Qualified scholarship
For purposes of this section—
(1) In general
The term "qualified scholarship" means any amount received by an individual as a scholarship or fellowship grant to the extent the individual establishes that, in accordance with the conditions of the grant, such amount was used for qualified tuition and related expenses.
(2) Qualified tuition and related expenses
For purposes of paragraph (1), the term "qualified tuition and related expenses" means—
(A) tuition and fees required for the enrollment or attendance of a student at an educational organization described in section 170(b)(1)(A)(ii), and
(B) fees, books, supplies, and equipment required for courses of instruction at such an educational organization.
(c) Limitation
(1) In general
Except as provided in paragraph (2), subsections (a) and (d) shall not apply to that portion of any amount received which represents payment for teaching, research, or other services by the student required as a condition for receiving the qualified scholarship or qualified tuition reduction.
(2) Exceptions
Paragraph (1) shall not apply to any amount received by an individual under—
(A) the National Health Service Corps Scholarship Program under section 338A(g)(1)(A) of the Public Health Service Act, or
(B) the Armed Forces Health Professions Scholarship and Financial Assistance program under subchapter I of
(d) Qualified tuition reduction
(1) In general
Gross income shall not include any qualified tuition reduction.
(2) Qualified tuition reduction
For purposes of this subsection, the term "qualified tuition reduction" means the amount of any reduction in tuition provided to an employee of an organization described in section 170(b)(1)(A)(ii) for the education (below the graduate level) at such organization (or another organization described in section 170(b)(1)(A)(ii)) of—
(A) such employee, or
(B) any person treated as an employee (or whose use is treated as an employee use) under the rules of section 132(h).
(3) Reduction must not discriminate in favor of highly compensated, etc.
Paragraph (1) shall apply with respect to any qualified tuition reduction provided with respect to any highly compensated employee only if such reduction is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees (within the meaning of section 414(q)). For purposes of this paragraph, the term "highly compensated employee" has the meaning given such term by section 414(q).
[(4) Repealed. Pub. L. 101–140, title II, §203(a)(1), (2), Nov. 8, 1989, 103 Stat. 830 ]
(5) Special rules for teaching and research assistants
In the case of the education of an individual who is a graduate student at an educational organization described in section 170(b)(1)(A)(ii) and who is engaged in teaching or research activities for such organization, paragraph (2) shall be applied as if it did not contain the phrase "(below the graduate level)".
(Aug. 16, 1954, ch. 736,
Amendment of Section
For termination of amendment by section 901 of
References in Text
Section 338A(g)(1)(A) of the Public Health Service Act, referred to in subsec. (c)(2)(A), is classified to
Amendments
2001—Subsec. (c).
1996—Subsec. (d)(2)(B).
1989—Subsec. (d)(4).
1988—Subsec. (d)(4).
Subsec. (d)(5).
1986—
Subsec. (a).
"(1) any amount received—
"(A) as a scholarship at an educational organization described in section 170(b)(1)(A)(ii), or
"(B) as a fellowship grant, including the value of contributed services and accommodations; and
"(2) any amount received to cover expenses for—
"(A) travel,
"(B) research,
"(C) clerical help, or
"(D) equipment,
which are incident to such a scholarship or to a fellowship grant, but only to the extent that the amount is so expended by the recipient."
Subsec. (b).
Subsec. (c).
Subsec. (d).
Subsec. (d)(3).
Subsec. (d)(4).
1984—Subsec. (d).
1980—Subsec. (c).
1976—Subsecs. (a)(1)(A), (b)(1), (2).
Subsec. (b)(2)(A)(iv).
Subsec. (b)(2)(B).
1961—Subsec. (b)(2)(A).
Effective and Termination Dates of 2001 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1989 Amendment
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1011B(a)(31)(B) of
Section 4001(c) of
Effective Date of 1986 Amendment
Amendment by section 123(a) of
Amendment by section 1114(b)(2) of
Amendment by section 1151(g)(2) of
Effective Date of 1984 Amendments
Section 532(b) of
Provisions of subsec. (d) treated as in effect on and after Jan. 1, 1984, in case of education described in
Effective Date of 1980 Amendment
Section 5(a)(2) of
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1961 Amendment
Section 110(h)(1) of
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Applicability of Certain Amendments by Public Law 99–514 in Relation to Treaty Obligations of United States
For nonapplication of amendment by section 123(a) of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Transitional Rules for Treatment of Certain Reductions in Tuition
Section 1853(f) of
"(1) A tuition reduction plan shall be treated as meeting the requirements of section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] if—
"(A) such plan would have met the requirements of such section (as amended by this section but without regard to the lack of evidence that benefits under such plan were the subject of good faith bargaining) on the day on which eligibility to participate in the plan was closed,
"(B) at all times thereafter, the tuition reductions available under such plan are available on substantially the same terms to all employees eligible to participate in such plan, and
"(C) the eligibility to participate in such plan closed on June 30, 1972, June 30, 1974, or December 31, 1975.
"(2) For purposes of applying section 117(d)(3) of the Internal Revenue Code of 1954 [now 1986] to all tuition reduction plans of an employer with at least 1 such plan described in paragraph (1) of this subsection, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement that the Secretary of the Treasury or his delegate finds to be a collective bargaining agreement between employee representatives and 1 or more employers, if, with respect to plans other than plans described in paragraph (1), there is evidence that such benefits were the subject of good faith bargaining.
"(3) Any reduction in tuition provided with respect to a full-time course of education furnished at the graduate level before July 1, 1988, shall not be included in gross income if—
"(A) such reduction would not be included in gross income under the Internal Revenue Service regulations in effect on the date of the enactment of the Tax Reform Act of 1984 [July 18, 1984], and
"(B) such reduction is provided with respect to a student who was accepted for admission to such course of education before July 1, 1984, and began such course of education before June 30, 1985."
National Research Service Awards
Scholarship Programs for Members of the Uniformed Services
"(a)
"(b)
"(c)
[Section 6 of
§118. Contributions to the capital of a corporation
(a) General rule
In the case of a corporation, gross income does not include any contribution to the capital of the taxpayer.
(b) Contributions in aid of construction, etc.
For purposes of subsection (a), except as provided in subsection (c), the term "contribution to the capital of the taxpayer" does not include any contribution in aid of construction or any other contribution as a customer or potential customer.
(c) Special rules for water and sewerage disposal utilities
(1) General rule
For purposes of this section, the term "contribution to the capital of the taxpayer" includes any amount of money or other property received from any person (whether or not a shareholder) by a regulated public utility which provides water or sewerage disposal services if—
(A) such amount is a contribution in aid of construction,
(B) in the case of contribution of property other than water or sewerage disposal facilities, such amount meets the requirements of the expenditure rule of paragraph (2), and
(C) such amount (or any property acquired or constructed with such amount) is not included in the taxpayer's rate base for ratemaking purposes.
(2) Expenditure rule
An amount meets the requirements of this paragraph if—
(A) an amount equal to such amount is expended for the acquisition or construction of tangible property described in section 1231(b)—
(i) which is the property for which the contribution was made or is of the same type as such property, and
(ii) which is used predominantly in the trade or business of furnishing water or sewerage disposal services,
(B) the expenditure referred to in subparagraph (A) occurs before the end of the second taxable year after the year in which such amount was received, and
(C) accurate records are kept of the amounts contributed and expenditures made, the expenditures to which contributions are allocated, and the year in which the contributions and expenditures are received and made.
(3) Definitions
For purposes of this subsection—
(A) Contribution in aid of construction
The term "contribution in aid of construction" shall be defined by regulations prescribed by the Secretary, except that such term shall not include amounts paid as service charges for starting or stopping services.
(B) Predominantly
The term "predominantly" means 80 percent or more.
(C) Regulated public utility
The term "regulated public utility" has the meaning given such term by section 7701(a)(33), except that such term shall not include any utility which is not required to provide water or sewerage disposal services to members of the general public in its service area.
(4) Disallowance of deductions and credits; adjusted basis
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure which constitutes a contribution in aid of construction to which this subsection applies. The adjusted basis of any property acquired with contributions in aid of construction to which this subsection applies shall be zero.
(d) Statute of limitations
If the taxpayer for any taxable year treats an amount as a contribution to the capital of the taxpayer described in subsection (c), then—
(1) the statutory period for the assessment of any deficiency attributable to any part of such amount shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of—
(A) the amount of the expenditure referred to in subparagraph (A) of subsection (c)(2),
(B) the taxpayer's intention not to make the expenditures referred to in such subparagraph, or
(C) a failure to make such expenditure within the period described in subparagraph (B) of subsection (c)(2), and
(2) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment.
(e) Cross references
(1) For basis of property acquired by a corporation through a contribution to its capital, see section 362.
(2) For special rules in the case of contributions of indebtedness, see section 108(e)(6).
(Aug. 16, 1954, ch. 736,
Amendments
1996—Subsec. (b).
Subsecs. (c) to (e).
1986—Subsec. (b).
Subsecs. (c), (d).
"(1) the statutory period for the assessment of any deficiency attributable to any part of such amount shall not expire before the expiration of 3 years from the date the Secretary is notified by the taxpayer (in such manner as the Secretary may prescribe) of—
"(A) the amount of the expenditure referred to in subparagraph (A) of subsection (b)(2),
"(B) the taxpayer's intention not to make the expenditures referred to in such subparagraph, or
"(C) a failure to make such expenditure within the period described in subparagraph (B) of subsection (b)(2); and
"(2) such deficiency may be assessed before the expiration of such 3-year period notwithstanding the provisions of any other law or rule of law which would otherwise prevent such assessment."
1984—Subsecs. (c), (d).
1980—Subsec. (c).
1978—Subsec. (b)(1).
Subsec. (b)(2)(A)(ii).
Subsec. (b)(3)(A).
Subsec. (b)(3)(C).
1976—Subsecs. (b), (c).
Effective Date of 1996 Amendment
Section 1613(a)(3) of
Effective Date of 1986 Amendment
Section 824(c) of
"(1)
"(2)
"(3)
"(4)
Effective Date of 1984 Amendment
Section 163(c) of
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Section 364(b) of
Effective Date of 1976 Amendment
Section 2120(c) of
§119. Meals or lodging furnished for the convenience of the employer
(a) Meals and lodging furnished to employee, his spouse, and his dependents, pursuant to employment
There shall be excluded from gross income of an employee the value of any meals or lodging furnished to him, his spouse, or any of his dependents by or on behalf of his employer for the convenience of the employer, but only if—
(1) in the case of meals, the meals are furnished on the business premises of the employer, or
(2) in the case of lodging, the employee is required to accept such lodging on the business premises of his employer as a condition of his employment.
(b) Special rules
For purposes of subsection (a)—
(1) Provisions of employment contract or State statute not to be determinative
In determining whether meals or lodging are furnished for the convenience of the employer, the provisions of an employment contract or of a State statute fixing terms of employment shall not be determinative of whether the meals or lodging are intended as compensation.
(2) Certain factors not taken into account with respect to meals
In determining whether meals are furnished for the convenience of the employer, the fact that a charge is made for such meals, and the fact that the employee may accept or decline such meals, shall not be taken into account.
(3) Certain fixed charges for meals
(A) In general
If—
(i) an employee is required to pay on a periodic basis a fixed charge for his meals, and
(ii) such meals are furnished by the employer for the convenience of the employer,
there shall be excluded from the employee's gross income an amount equal to such fixed charge.
(B) Application of subparagraph (A)
Subparagraph (A) shall apply—
(i) whether the employee pays the fixed charge out of his stated compensation or out of his own funds, and
(ii) only if the employee is required to make the payment whether he accepts or declines the meals.
(4) Meals furnished to employees on business premises where meals of most employees are otherwise excludable
All meals furnished on the business premises of an employer to such employer's employees shall be treated as furnished for the convenience of the employer if, without regard to this paragraph, more than half of the employees to whom such meals are furnished on such premises are furnished such meals for the convenience of the employer.
(c) Employees living in certain camps
(1) In general
In the case of an individual who is furnished lodging in a camp located in a foreign country by or on behalf of his employer, such camp shall be considered to be part of the business premises of the employer.
(2) Camp
For purposes of this section, a camp constitutes lodging which is—
(A) provided by or on behalf of the employer for the convenience of the employer because the place at which such individual renders services is in a remote area where satisfactory housing is not available on the open market,
(B) located, as near as practicable, in the vicinity of the place at which such individual renders services, and
(C) furnished in a common area (or enclave) which is not available to the public and which normally accommodates 10 or more employees.
(d) Lodging furnished by certain educational institutions to employees
(1) In general
In the case of an employee of an educational institution, gross income shall not include the value of qualified campus lodging furnished to such employee during the taxable year.
(2) Exception in cases of inadequate rent
Paragraph (1) shall not apply to the extent of the excess of—
(A) the lesser of—
(i) 5 percent of the appraised value of the qualified campus lodging, or
(ii) the average of the rentals paid by individuals (other than employees or students of the educational institution) during such calendar year for lodging provided by the educational institution which is comparable to the qualified campus lodging provided to the employee, over
(B) the rent paid by the employee for the qualified campus lodging during such calendar year.
The appraised value under subparagraph (A)(i) shall be determined as of the close of the calendar year in which the taxable year begins, or, in the case of a rental period not greater than 1 year, at any time during the calendar year in which such period begins.
(3) Qualified campus lodging
For purposes of this subsection, the term "qualified campus lodging" means lodging to which subsection (a) does not apply and which is—
(A) located on, or in the proximity of, a campus of the educational institution, and
(B) furnished to the employee, his spouse, and any of his dependents by or on behalf of such institution for use as a residence.
(4) Educational institution, etc.
For purposes of this subsection—
(A) In general
The term "educational institution" means—
(i) an institution described in section 170(b)(1)(A)(ii) (or an entity organized under State law and composed of public institutions so described), or
(ii) an academic health center.
(B) Academic health center
For purposes of subparagraph (A), the term "academic health center" means an entity—
(i) which is described in section 170(b)(1)(A)(iii),
(ii) which receives (during the calendar year in which the taxable year of the taxpayer begins) payments under subsection (d)(5)(B) or (h) of section 1886 of the Social Security Act (relating to graduate medical education), and
(iii) which has as one of its principal purposes or functions the providing and teaching of basic and clinical medical science and research with the entity's own faculty.
(Aug. 16, 1954, ch. 736,
References in Text
Section 1886(d)(5)(B) or (h) of the Social Security Act, referred to in subsec. (d)(4)(B)(ii), is classified to section 1395ww(d)(5)(B) or (h) of Title 42, The Public Health and Welfare.
Amendments
1998—Subsec. (b)(4).
1996—Subsec. (d)(4).
1988—Subsec. (d).
1986—Subsec. (d).
1981—Subsec. (c).
1980—Subsec. (a).
1978—Subsec. (a).
Effective Date of 1998 Amendment
Effective Date of 1996 Amendment
Section 1123(b) of
Effective Date of 1988 Amendment
Amendment by
Effective Date of 1986 Amendment
Section 1164(b) of
Effective Date of 1981 Amendment
Amendment by
Effective Date of 1980 Amendment
Amendment by
Effective Date of 1978 Amendment
Section 4(b) of
Effective Date of 1978 Amendment; Election of Prior Law
Amendment by
Statute of Limitations
Treatment of Certain Statutory Subsistence Allowances or Subsistence Allowances Negotiated in Accordance With State Law Received by State Police Officers Before January 1, 1978
Section 3 of
"(a)
"(1) an individual who was employed as a State police officer received a statutory subsistence allowance or a subsistence allowance negotiated in accordance with State law while so employed,
"(2) such individual elects, on or before April 15, 1979, and in such manner and form as the Secretary of the Treasury may prescribe, to have this section apply to such allowance, and
"(3) this section applies to such allowance,
then, for purposes of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], such allowance shall not be included in such individual's gross income.
"(b)
"(1) after December 31, 1969, and before January 1, 1974, to the extent such individual did not include such allowance in gross income on his income tax return for the taxable year in which such allowance was received, or
"(2) during the calendar year 1974, 1975, 1976, or 1977.
"(c)
"(1)
"(2)
"(d)
"(e)
§120. Amounts received under qualified group legal services plans
(a) Exclusion by employee for contributions and legal services provided by employer
Gross income of an employee, his spouse, or his dependents, does not include—
(1) amounts contributed by an employer on behalf of an employee, his spouse, or his dependents under a qualified group legal services plan (as defined in subsection (b)); or
(2) the value of legal services provided, or amounts paid for legal services, under a qualified group legal services plan (as defined in subsection (b)) to, or with respect to, an employee, his spouse, or his dependents.
No exclusion shall be allowed under this section with respect to an individual for any taxable year to the extent that the value of insurance (whether through an insurer or self-insurance) against legal costs incurred by the individual (or his spouse or dependents) provided under a qualified group legal services plan exceeds $70.
(b) Qualified group legal services plan
For purposes of this section, a qualified group legal services plan is a separate written plan of an employer for the exclusive benefit of his employees or their spouses or dependents to provide such employees, spouses, or dependents with specified benefits consisting of personal legal services through prepayment of, or provision in advance for, legal fees in whole or in part by the employer, if the plan meets the requirements of subsection (c).
(c) Requirements
(1) Discrimination
The contributions or benefits provided under the plan shall not discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)).
(2) Eligibility
The plan shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are described in paragraph (1). For purposes of this paragraph, there shall be excluded from consideration employees not included in the plan who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that group legal services plan benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
(3) Contribution limitation
Not more than 25 percent of the amounts contributed under the plan during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.
(4) Notification
The plan shall give notice to the Secretary, in such manner as the Secretary may by regulations prescribe, that it is applying for recognition of the status of a qualified group legal services plan.
(5) Contributions
Amounts contributed under the plan shall be paid only (A) to insurance companies, or to organizations or persons that provide personal legal services, or indemnification against the cost of personal legal services, in exchange for a prepayment or payment of a premium, (B) to organizations or trusts described in section 501(c)(20), (C) to organizations described in section 501(c) which are permitted by that section to receive payments from an employer for support of one or more qualified group legal services plan or plans, except that such organizations shall pay or credit the contribution to an organization or trust described in section 501(c)(20), (D) as prepayments to providers of legal services under the plan, or (E) a combination of the above.
(d) Other definitions and special rules
For purposes of this section—
(1) Employee
The term "employee" includes, for any year, an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(2) Employer
An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (1).
(3) Allocations
Allocations of amounts contributed under the plan shall be made in accordance with regulations prescribed by the Secretary and shall take into account the expected relative utilization of benefits to be provided from such contributions or plan assets and the manner in which any premium or other charge was developed.
(4) Dependent
The term "dependent" has the meaning given to it by section 152 (determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof).
(5) Exclusive benefit
In the case of a plan to which contributions are made by more than one employer, in determining whether the plan is for the exclusive benefit of an employer's employees or their spouses or dependents, the employees of any employer who maintains the plan shall be considered to be the employees of each employer who maintains the plan.
(6) Attribution rules
For purposes of this section—
(A) ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)), and
(B) the interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A).
(7) Time of notice to Secretary
A plan shall not be a qualified group legal services plan for any period prior to the time notification was provided to the Secretary in accordance with subsection (c)(4), if such notice is given after the time prescribed by the Secretary by regulations for giving such notice.
(e) Termination
This section and section 501(c)(20) shall not apply to taxable years beginning after June 30, 1992.
(f) Cross reference
For reporting and recordkeeping requirements, see section 6039D.
(Added
Prior Provisions
A prior section 120, act Aug. 16, 1954, ch. 736,
Amendments
2004—Subsec. (d)(4).
1991—Subsec. (e).
1990—Subsec. (e).
1989—Subsec. (b).
Subsec. (c)(2).
Subsec. (e).
1988—Subsec. (a).
Subsec. (c)(2).
Subsec. (e).
1986—Subsec. (b).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d)(1).
Subsec. (e).
1984—Subsec. (e).
Subsec. (f).
1983—Subsec. (e).
1981—Subsec. (e).
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1991 Amendment
Section 104(b) of
Effective Date of 1990 Amendment
Section 11404(c) of
Effective Date of 1989 Amendments
Section 7102(b) of
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1011B(a)(31)(B) of
Section 4002(c) of
Effective Date of 1986 Amendment
Amendment by section 1114(b)(3) of
Amendment by section 1151(c)(3), (g)(1) of
Section 1162(c) of
"(1)
"(2)
"(3)
Effective Date of 1984 Amendment
Section 1(d)(1) of
Amendment by section 1(b)(3)(A) of
Effective Date of 1983 Amendment
Amendment by
Effective Date
Section 2134(e) of
"(1)
"(2)
"(3)
"(A) For purposes of section 120 of the Internal Revenue Code of 1986, a written group legal services plan which was in existence on June 4, 1976, shall be considered as satisfying the requirements of subsections (b) and (c) of such section 120 for the period ending with the compliance date (determined under subparagraph (B)).
"(B)
"(i) the date occurring 180 days after the date of the enactment of this Act [Oct. 4, 1976], or
"(ii) if later, in the case of a plan which is maintained pursuant to one or more agreements which the Secretary of Labor finds to be collective bargaining agreements, the earlier of December 31, 1981, or the date on which the last of the collective bargaining agreements relating to the plan terminates (determined without regard to any extension thereof agreed to after the date of the enactment of this Act [Oct. 4, 1976])."
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Extension of Employer-Provided Group Legal Services
Section 104(a)(2) of
Special Rule for Taxable Years Beginning in 1990
Section 7102(a)(2) of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Study and Report
Section 2134(d) of
§121. Exclusion of gain from sale of principal residence
(a) Exclusion
Gross income shall not include gain from the sale or exchange of property if, during the 5-year period ending on the date of the sale or exchange, such property has been owned and used by the taxpayer as the taxpayer's principal residence for periods aggregating 2 years or more.
(b) Limitations
(1) In general
The amount of gain excluded from gross income under subsection (a) with respect to any sale or exchange shall not exceed $250,000.
(2) Special rules for joint returns
In the case of a husband and wife who make a joint return for the taxable year of the sale or exchange of the property—
(A) $500,000 Limitation for certain joint returns
Paragraph (1) shall be applied by substituting "$500,000" for "$250,000" if—
(i) either spouse meets the ownership requirements of subsection (a) with respect to such property;
(ii) both spouses meet the use requirements of subsection (a) with respect to such property; and
(iii) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3).
(B) Other joint returns
If such spouses do not meet the requirements of subparagraph (A), the limitation under paragraph (1) shall be the sum of the limitations under paragraph (1) to which each spouse would be entitled if such spouses had not been married. For purposes of the preceding sentence, each spouse shall be treated as owning the property during the period that either spouse owned the property.
(3) Application to only 1 sale or exchange every 2 years
(A) In general
Subsection (a) shall not apply to any sale or exchange by the taxpayer if, during the 2-year period ending on the date of such sale or exchange, there was any other sale or exchange by the taxpayer to which subsection (a) applied.
(B) Pre-May 7, 1997, sales not taken into account
Subparagraph (A) shall be applied without regard to any sale or exchange before May 7, 1997.
(4) 1 Special rule for certain sales by surviving spouses
In the case of a sale or exchange of property by an unmarried individual whose spouse is deceased on the date of such sale, paragraph (1) shall be applied by substituting "$500,000" for "$250,000" if such sale occurs not later than 2 years after the date of death of such spouse and the requirements of paragraph (2)(A) were met immediately before such date of death.
(4) 1 Exclusion of gain allocated to nonqualified use
(A) In general
Subsection (a) shall not apply to so much of the gain from the sale or exchange of property as is allocated to periods of nonqualified use.
(B) Gain allocated to periods of nonqualified use
For purposes of subparagraph (A), gain shall be allocated to periods of nonqualified use based on the ratio which—
(i) the aggregate periods of nonqualified use during the period such property was owned by the taxpayer, bears to
(ii) the period such property was owned by the taxpayer.
(C) Period of nonqualified use
For purposes of this paragraph—
(i) In general
The term "period of nonqualified use" means any period (other than the portion of any period preceding January 1, 2009) during which the property is not used as the principal residence of the taxpayer or the taxpayer's spouse or former spouse.
(ii) Exceptions
The term "period of nonqualified use" does not include—
(I) any portion of the 5-year period described in subsection (a) which is after the last date that such property is used as the principal residence of the taxpayer or the taxpayer's spouse,
(II) any period (not to exceed an aggregate period of 10 years) during which the taxpayer or the taxpayer's spouse is serving on qualified official extended duty (as defined in subsection (d)(9)(C)) described in clause (i), (ii), or (iii) of subsection (d)(9)(A), and
(III) any other period of temporary absence (not to exceed an aggregate period of 2 years) due to change of employment, health conditions, or such other unforeseen circumstances as may be specified by the Secretary.
(D) Coordination with recognition of gain attributable to depreciation
For purposes of this paragraph—
(i) subparagraph (A) shall be applied after the application of subsection (d)(6), and
(ii) subparagraph (B) shall be applied without regard to any gain to which subsection (d)(6) applies.
(c) Exclusion for taxpayers failing to meet certain requirements
(1) In general
In the case of a sale or exchange to which this subsection applies, the ownership and use requirements of subsection (a), and subsection (b)(3), shall not apply; but the dollar limitation under paragraph (1) or (2) of subsection (b), whichever is applicable, shall be equal to—
(A) the amount which bears the same ratio to such limitation (determined without regard to this paragraph) as
(B)(i) the shorter of—
(I) the aggregate periods, during the 5-year period ending on the date of such sale or exchange, such property has been owned and used by the taxpayer as the taxpayer's principal residence; or
(II) the period after the date of the most recent prior sale or exchange by the taxpayer to which subsection (a) applied and before the date of such sale or exchange, bears to
(ii) 2 years.
(2) Sales and exchanges to which subsection applies
This subsection shall apply to any sale or exchange if—
(A) subsection (a) would not (but for this subsection) apply to such sale or exchange by reason of—
(i) a failure to meet the ownership and use requirements of subsection (a), or
(ii) subsection (b)(3), and
(B) such sale or exchange is by reason of a change in place of employment, health, or, to the extent provided in regulations, unforeseen circumstances.
(d) Special rules
(1) Joint returns
If a husband and wife make a joint return for the taxable year of the sale or exchange of the property, subsections (a) and (c) shall apply if either spouse meets the ownership and use requirements of subsection (a) with respect to such property.
(2) Property of deceased spouse
For purposes of this section, in the case of an unmarried individual whose spouse is deceased on the date of the sale or exchange of property, the period such unmarried individual owned and used such property shall include the period such deceased spouse owned and used such property before death.
(3) Property owned by spouse or former spouse
For purposes of this section—
(A) Property transferred to individual from spouse or former spouse
In the case of an individual holding property transferred to such individual in a transaction described in section 1041(a), the period such individual owns such property shall include the period the transferor owned the property.
(B) Property used by former spouse pursuant to divorce decree, etc.
Solely for purposes of this section, an individual shall be treated as using property as such individual's principal residence during any period of ownership while such individual's spouse or former spouse is granted use of the property under a divorce or separation instrument (as defined in section 71(b)(2)).
(4) Tenant-stockholder in cooperative housing corporation
For purposes of this section, if the taxpayer holds stock as a tenant-stockholder (as defined in section 216) in a cooperative housing corporation (as defined in such section), then—
(A) the holding requirements of subsection (a) shall be applied to the holding of such stock, and
(B) the use requirements of subsection (a) shall be applied to the house or apartment which the taxpayer was entitled to occupy as such stockholder.
(5) Involuntary conversions
(A) In general
For purposes of this section, the destruction, theft, seizure, requisition, or condemnation of property shall be treated as the sale of such property.
(B) Application of section 1033
In applying section 1033 (relating to involuntary conversions), the amount realized from the sale or exchange of property shall be treated as being the amount determined without regard to this section, reduced by the amount of gain not included in gross income pursuant to this section.
(C) Property acquired after involuntary conversion
If the basis of the property sold or exchanged is determined (in whole or in part) under section 1033(b) (relating to basis of property acquired through involuntary conversion), then the holding and use by the taxpayer of the converted property shall be treated as holding and use by the taxpayer of the property sold or exchanged.
(6) Recognition of gain attributable to depreciation
Subsection (a) shall not apply to so much of the gain from the sale of any property as does not exceed the portion of the depreciation adjustments (as defined in section 1250(b)(3)) attributable to periods after May 6, 1997, in respect of such property.
(7) Determination of use during periods of out-of-residence care
In the case of a taxpayer who—
(A) becomes physically or mentally incapable of self-care, and
(B) owns property and uses such property as the taxpayer's principal residence during the 5-year period described in subsection (a) for periods aggregating at least 1 year,
then the taxpayer shall be treated as using such property as the taxpayer's principal residence during any time during such 5-year period in which the taxpayer owns the property and resides in any facility (including a nursing home) licensed by a State or political subdivision to care for an individual in the taxpayer's condition.
(8) Sales of remainder interests
For purposes of this section—
(A) In general
At the election of the taxpayer, this section shall not fail to apply to the sale or exchange of an interest in a principal residence by reason of such interest being a remainder interest in such residence, but this section shall not apply to any other interest in such residence which is sold or exchanged separately.
(B) Exception for sales to related parties
Subparagraph (A) shall not apply to any sale to, or exchange with, any person who bears a relationship to the taxpayer which is described in section 267(b) or 707(b).
(9) Uniformed services, Foreign Service, and intelligence community
(A) In general
At the election of an individual with respect to a property, the running of the 5-year period described in subsections (a) and (c)(1)(B) and paragraph (7) of this subsection with respect to such property shall be suspended during any period that such individual or such individual's spouse is serving on qualified official extended duty—
(i) as a member of the uniformed services,
(ii) as a member of the Foreign Service of the United States, or
(iii) as an employee of the intelligence community.
(B) Maximum period of suspension
The 5-year period described in subsection (a) shall not be extended more than 10 years by reason of subparagraph (A).
(C) Qualified official extended duty
For purposes of this paragraph—
(i) In general
The term "qualified official extended duty" means any extended duty while serving at a duty station which is at least 50 miles from such property or while residing under Government orders in Government quarters.
(ii) Uniformed services
The term "uniformed services" has the meaning given such term by
(iii) Foreign Service of the United States
The term "member of the Foreign Service of the United States" has the meaning given the term "member of the Service" by paragraph (1), (2), (3), (4), or (5) of section 103 of the Foreign Service Act of 1980, as in effect on the date of the enactment of this paragraph.
(iv) Employee of intelligence community
The term "employee of the intelligence community" means an employee (as defined by
(I) the Office of the Director of National Intelligence,
(II) the Central Intelligence Agency,
(III) the National Security Agency,
(IV) the Defense Intelligence Agency,
(V) the National Geospatial-Intelligence Agency,
(VI) the National Reconnaissance Office,
(VII) any other office within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs,
(VIII) any of the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, the Department of Treasury, the Department of Energy, and the Coast Guard,
(IX) the Bureau of Intelligence and Research of the Department of State, or
(X) any of the elements of the Department of Homeland Security concerned with the analyses of foreign intelligence information.
(v) Extended duty
The term "extended duty" means any period of active duty pursuant to a call or order to such duty for a period in excess of 90 days or for an indefinite period.
(D) Special rules relating to election
(i) Election limited to 1 property at a time
An election under subparagraph (A) with respect to any property may not be made if such an election is in effect with respect to any other property.
(ii) Revocation of election
An election under subparagraph (A) may be revoked at any time.
(10) Property acquired in like-kind exchange
If a taxpayer acquires property in an exchange with respect to which gain is not recognized (in whole or in part) to the taxpayer under subsection (a) or (b) of section 1031, subsection (a) shall not apply to the sale or exchange of such property by such taxpayer (or by any person whose basis in such property is determined, in whole or in part, by reference to the basis in the hands of such taxpayer) during the 5-year period beginning with the date of such acquisition.
[(11) Repealed. Pub. L. 111–312, title III, §301(a), Dec. 17, 2010, 124 Stat. 3300 ]
(12) Peace Corps
(A) In general
At the election of an individual with respect to a property, the running of the 5-year period described in subsections (a) and (c)(1)(B) and paragraph (7) of this subsection with respect to such property shall be suspended during any period that such individual or such individual's spouse is serving outside the United States—
(i) on qualified official extended duty (as defined in paragraph (9)(C)) as an employee of the Peace Corps, or
(ii) as an enrolled volunteer or volunteer leader under section 5 or 6 (as the case may be) of the Peace Corps Act (
(B) Applicable rules
For purposes of subparagraph (A), rules similar to the rules of subparagraphs (B) and (D) 2 shall apply.
(e) Denial of exclusion for expatriates
This section shall not apply to any sale or exchange by an individual if the treatment provided by section 877(a)(1) applies to such individual.
(f) Election to have section not apply
This section shall not apply to any sale or exchange with respect to which the taxpayer elects not to have this section apply.
(g) Residences acquired in rollovers under section 1034
For purposes of this section, in the case of property the acquisition of which by the taxpayer resulted under section 1034 3 (as in effect on the day before the date of the enactment of this section) in the nonrecognition of any part of the gain realized on the sale or exchange of another residence, in determining the period for which the taxpayer has owned and used such property as the taxpayer's principal residence, there shall be included the aggregate periods for which such other residence (and each prior residence taken into account under section 1223(6) in determining the holding period of such property) had been so owned and used.
(Added
Amendment of Section
For termination of amendment by section 304 of
For termination of amendment by section 901 of
References in Text
The date of the enactment of this paragraph, referred to in subsec. (d)(9)(C)(ii), (iii), is the date of enactment of
Section 103 of the Foreign Service Act of 1980, referred to in subsec. (d)(9)(C)(iii), is classified to
Section 1034 (as in effect on the day before the date of the enactment of this section), referred to in subsec. (g), probably means
Codification
Prior Provisions
A prior section 121 was renumbered
Amendments
2010—Subsec. (d)(11).
"(A) the estate of a decedent,
"(B) any individual who acquired such property from the decedent (within the meaning of section 1022), and
"(C) a trust which, immediately before the death of the decedent, was a qualified revocable trust (as defined in section 645(b)(1)) established by the decedent,
determined by taking into account the ownership and use by the decedent."
2008—Subsec. (b)(4).
Subsec. (d)(9)(C)(vi).
Subsec. (d)(9)(E).
Subsec. (d)(12).
2007—Subsec. (b)(4).
Subsec. (d)(9)(E).
2006—Subsec. (d)(9).
Subsec. (d)(9)(A).
"(i) as a member of the uniformed services,
"(ii) as a member of the Foreign Service of the United States, or
"(iii) as an employee of the intelligence community."
for "duty as a member of the uniformed services or of the Foreign Service of the United States."
Subsec. (d)(9)(C)(iv), (v).
Subsec. (d)(9)(C)(vi).
2005—Subsec. (d)(10).
Subsec. (d)(11).
Subsec. (g).
2004—Subsec. (d)(10).
2003—Subsec. (d)(9), (10).
2001—Subsec. (d)(9).
1998—Subsec. (b)(2).
"(A) a husband and wife make a joint return for the taxable year of the sale or exchange of the property,
"(B) either spouse meets the ownership requirements of subsection (a) with respect to such property,
"(C) both spouses meet the use requirements of subsection (a) with respect to such property, and
"(D) neither spouse is ineligible for the benefits of subsection (a) with respect to such property by reason of paragraph (3)."
Subsec. (c)(1).
"(A) the amount which bears the same ratio to the amount which would be so excluded under this section if such requirements had been met, as
"(B) the shorter of—
"(i) the aggregate periods, during the 5-year period ending on the date of such sale or exchange, such property has been owned and used by the taxpayer as the taxpayer's principal residence, or
"(ii) the period after the date of the most recent prior sale or exchange by the taxpayer to which subsection (a) applied and before the date of such sale or exchange,
bears to 2 years."
1997—
1988—Subsec. (d)(9).
1981—Subsec. (b)(1).
1978—
Subsec. (a).
Subsec. (b).
Subsec. (d)(2).
Subsec. (d)(5).
Subsec. (d)(8).
1976—Subsec. (b)(1).
Subsecs. (c), (d)(5).
Effective and Termination Dates of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2007 Amendment
Effective Date of 2006 Amendment
Effective Date of 2005 Amendment
Amendment by section 402(a)(3) of
Amendment by section 403(ee) of
Effective Date of 2004 Amendment
Effective Date of 2003 Amendment
"(1)
"(2)
Effective and Termination Dates of 2001 Amendment
"(1)
"(2)
"(3)
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Section 312(d) of
"(1)
"(2)
"(3)
"(4)
"(A) such sale or exchange is pursuant to a contract which was binding on such date, or
"(B) without regard to such amendments, gain would not be recognized under section 1034 of the Internal Revenue Code of 1986 (as in effect on the day before the date of the enactment of this Act) on such sale or exchange by reason of a new residence acquired on or before such date or with respect to the acquisition of which by the taxpayer a binding contract was in effect on such date.
This paragraph shall not apply to any sale or exchange by an individual if the treatment provided by section 877(a)(1) of the Internal Revenue Code of 1986 applies to such individual."
Effective Date of 1988 Amendment
Section 6011(b) of
Effective Date of 1981 Amendment
Section 123(b) of
Effective Date of 1978 Amendment
Section 404(d)(1) of
Effective Date of 1976 Amendment
Section 1404(b) of
Effective Date
Section 206(c) of
Sense of Congress Concerning Tax Treatment of Principal Residence of Members of Armed Forces While Away From Home on Active Duty
Transitional Rule in Case of Sale or Exchange of Residence Before July 26, 1981
Section 404(d)(2) of
1 So in original. Two pars. (4) have been enacted.
3 See References in Text note below.
§122. Certain reduced uniformed services retirement pay
(a) General rule
In the case of a member or former member of the uniformed services of the United States, gross income does not include the amount of any reduction in his retired or retainer pay pursuant to the provisions of
(b) Special rule
(1) Amount excluded from gross income
In the case of any individual referred to in subsection (a), all amounts received after December 31, 1965, as retired or retainer pay shall be excluded from gross income until there has been so excluded an amount equal to the consideration for the contract. The preceding sentence shall apply only to the extent that the amounts received would, but for such sentence, be includible in gross income.
(2) Consideration for the contract
For purposes of paragraph (1) and section 72(n), the term "consideration for the contract" means, in respect of any individual, the sum of—
(A) the total amount of the reductions before January 1, 1966, in his retired or retainer pay by reason of an election under
(B) any amounts deposited at any time by him pursuant to section 1438 or 1452(d) of such title 10.
(Added
Prior Provisions
A prior section 122 was renumbered
Amendments
1974—Subsec. (a).
Subsec. (b)(2).
Subsec. (b)(2)(B).
Effective Date of 1974 Amendment
Amendment by section 2005(c)(10) of
Section 2007(c) of
Effective Date
Section 1(d) of
§123. Amounts received under insurance contracts for certain living expenses
(a) General rule
In the case of an individual whose principal residence is damaged or destroyed by fire, storm, or other casualty, or who is denied access to his principal residence by governmental authorities because of the occurrence or threat of occurrence of such a casualty, gross income does not include amounts received by such individual under an insurance contract which are paid to compensate or reimburse such individual for living expenses incurred for himself and members of his household resulting from the loss of use or occupancy of such residence.
(b) Limitation
Subsection (a) shall apply to amounts received by the taxpayer for living expenses incurred during any period only to the extent the amounts received do not exceed the amount by which—
(1) the actual living expenses incurred during such period for himself and members of his household resulting from the loss of use or occupancy of their residence, exceed
(2) the normal living expenses which would have been incurred for himself and members of his household during such period.
(Added
Prior Provisions
A prior section 123 was renumbered
Effective Date
Section 901(c) of
[§124. Repealed. Pub. L. 101–508, title XI, §11801(a)(9), Nov. 5, 1990, 104 Stat. 1388–520 ]
Section, added
A prior section 124 was renumbered
Savings Provision
For provisions that nothing in repeal by
§125. Cafeteria plans
(a) General rule
Except as provided in subsection (b), no amount shall be included in the gross income of a participant in a cafeteria plan solely because, under the plan, the participant may choose among the benefits of the plan.
(b) Exception for highly compensated participants and key employees
(1) Highly compensated participants
In the case of a highly compensated participant, subsection (a) shall not apply to any benefit attributable to a plan year for which the plan discriminates in favor of—
(A) highly compensated individuals as to eligibility to participate, or
(B) highly compensated participants as to contributions and benefits.
(2) Key employees
In the case of a key employee (within the meaning of section 416(i)(1)), subsection (a) shall not apply to any benefit attributable to a plan for which the statutory nontaxable benefits provided to key employees exceed 25 percent of the aggregate of such benefits provided for all employees under the plan. For purposes of the preceding sentence, statutory nontaxable benefits shall be determined without regard to the second sentence of subsection (f).
(3) Year of inclusion
For purposes of determining the taxable year of inclusion, any benefit described in paragraph (1) or (2) shall be treated as received or accrued in the taxable year of the participant or key employee in which the plan year ends.
(c) Discrimination as to benefits or contributions
For purposes of subparagraph (B) of subsection (b)(1), a cafeteria plan does not discriminate where qualified benefits and total benefits (or employer contributions allocable to qualified benefits and employer contributions for total benefits) do not discriminate in favor of highly compensated participants.
(d) Cafeteria plan defined
For purposes of this section—
(1) In general
The term "cafeteria plan" means a written plan under which—
(A) all participants are employees, and
(B) the participants may choose among 2 or more benefits consisting of cash and qualified benefits.
(2) Deferred compensation plans excluded
(A) In general
The term "cafeteria plan" does not include any plan which provides for deferred compensation.
(B) Exception for cash and deferred arrangements
Subparagraph (A) shall not apply to a profit-sharing or stock bonus plan or rural cooperative plan (within the meaning of section 401(k)(7)) which includes a qualified cash or deferred arrangement (as defined in section 401(k)(2)) to the extent of amounts which a covered employee may elect to have the employer pay as contributions to a trust under such plan on behalf of the employee.
(C) Exception for certain plans maintained by educational institutions
Subparagraph (A) shall not apply to a plan maintained by an educational organization described in section 170(b)(1)(A)(ii) to the extent of amounts which a covered employee may elect to have the employer pay as contributions for post-retirement group life insurance if—
(i) all contributions for such insurance must be made before retirement, and
(ii) such life insurance does not have a cash surrender value at any time.
For purposes of section 79, any life insurance described in the preceding sentence shall be treated as group-term life insurance.
(D) Exception for health savings accounts
Subparagraph (A) shall not apply to a plan to the extent of amounts which a covered employee may elect to have the employer pay as contributions to a health savings account established on behalf of the employee.
(e) Highly compensated participant and individual defined
For purposes of this section—
(1) Highly compensated participant
The term "highly compensated participant" means a participant who is—
(A) an officer,
(B) a shareholder owning more than 5 percent of the voting power or value of all classes of stock of the employer,
(C) highly compensated, or
(D) a spouse or dependent (within the meaning of section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof) of an individual described in subparagraph (A), (B), or (C).
(2) Highly compensated individual
The term "highly compensated individual" means an individual who is described in subparagraphs 1 (A), (B), (C), or (D) of paragraph (1).
(f) Qualified benefits defined
For purposes of this section, the term "qualified benefit" means any benefit which, with the application of subsection (a), is not includible in the gross income of the employee by reason of an express provision of this chapter (other than section 106(b), 117, 127, or 132). Such term includes any group term life insurance which is includible in gross income only because it exceeds the dollar limitation of section 79 and such term includes any other benefit permitted under regulations. Such term shall not include any product which is advertised, marketed, or offered as long-term care insurance.
(g) Special rules
(1) Collectively bargained plan not considered discriminatory
For purposes of this section, a plan shall not be treated as discriminatory if the plan is maintained under an agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and one or more employers.
(2) Health benefits
For purposes of subparagraph (B) of subsection (b)(1), a cafeteria plan which provides health benefits shall not be treated as discriminatory if—
(A) contributions under the plan on behalf of each participant include an amount which—
(i) equals 100 percent of the cost of the health benefit coverage under the plan of the majority of the highly compensated participants similarly situated, or
(ii) equals or exceeds 75 percent of the cost of the health benefit coverage of the participant (similarly situated) having the highest cost health benefit coverage under the plan, and
(B) contributions or benefits under the plan in excess of those described in subparagraph (A) bear a uniform relationship to compensation.
(3) Certain participation eligibility rules not treated as discriminatory
For purposes of subparagraph (A) of subsection (b)(1), a classification shall not be treated as discriminatory if the plan—
(A) benefits a group of employees described in section 410(b)(2)(A)(i), and
(B) meets the requirements of clauses (i) and (ii):
(i) No employee is required to complete more than 3 years of employment with the employer or employers maintaining the plan as a condition of participation in the plan, and the employment requirement for each employee is the same.
(ii) Any employee who has satisfied the employment requirement of clause (i) and who is otherwise entitled to participate in the plan commences participation no later than the first day of the first plan year beginning after the date the employment requirement was satisfied unless the employee was separated from service before the first day of that plan year.
(4) Certain controlled groups, etc.
All employees who are treated as employed by a single employer under subsection (b), (c), or (m) of section 414 shall be treated as employed by a single employer for purposes of this section.
(h) Special rule for unused benefits in health flexible spending arrangements of individuals called to active duty
(1) In general
For purposes of this title, a plan or other arrangement shall not fail to be treated as a cafeteria plan or health flexible spending arrangement merely because such arrangement provides for qualified reservist distributions.
(2) Qualified reservist distribution
For purposes of this subsection, the term "qualified reservist distribution" means,2 any distribution to an individual of all or a portion of the balance in the employee's account under such arrangement if—
(A) such individual was (by reason of being a member of a reserve component (as defined in
(B) such distribution is made during the period beginning on the date of such order or call and ending on the last date that reimbursements could otherwise be made under such arrangement for the plan year which includes the date of such order or call.
(i) Limitation on health flexible spending arrangements
For purposes of this section, if a benefit is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit shall not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement.
(j) Simple cafeteria plans for small businesses
(1) In general
An eligible employer maintaining a simple cafeteria plan with respect to which the requirements of this subsection are met for any year shall be treated as meeting any applicable nondiscrimination requirement during such year.
(2) Simple cafeteria plan
For purposes of this subsection, the term "simple cafeteria plan" means a cafeteria plan—
(A) which is established and maintained by an eligible employer, and
(B) with respect to which the contribution requirements of paragraph (3), and the eligibility and participation requirements of paragraph (4), are met.
(3) Contribution requirements
(A) In general
The requirements of this paragraph are met if, under the plan the employer is required, without regard to whether a qualified employee makes any salary reduction contribution, to make a contribution to provide qualified benefits under the plan on behalf of each qualified employee in an amount equal to—
(i) a uniform percentage (not less than 2 percent) of the employee's compensation for the plan year, or
(ii) an amount which is not less than the lesser of—
(I) 6 percent of the employee's compensation for the plan year, or
(II) twice the amount of the salary reduction contributions of each qualified employee.
(B) Matching contributions on behalf of highly compensated and key employees
The requirements of subparagraph (A)(ii) shall not be treated as met if, under the plan, the rate of contributions with respect to any salary reduction contribution of a highly compensated or key employee at any rate of contribution is greater than that with respect to an employee who is not a highly compensated or key employee.
(C) Additional contributions
Subject to subparagraph (B), nothing in this paragraph shall be treated as prohibiting an employer from making contributions to provide qualified benefits under the plan in addition to contributions required under subparagraph (A).
(D) Definitions
For purposes of this paragraph—
(i) Salary reduction contribution
The term "salary reduction contribution" means, with respect to a cafeteria plan, any amount which is contributed to the plan at the election of the employee and which is not includible in gross income by reason of this section.
(ii) Qualified employee
The term "qualified employee" means, with respect to a cafeteria plan, any employee who is not a highly compensated or key employee and who is eligible to participate in the plan.
(iii) Highly compensated employee
The term "highly compensated employee" has the meaning given such term by section 414(q).
(iv) Key employee
The term "key employee" has the meaning given such term by section 416(i).
(4) Minimum eligibility and participation requirements
(A) In general
The requirements of this paragraph shall be treated as met with respect to any year if, under the plan—
(i) all employees who had at least 1,000 hours of service for the preceding plan year are eligible to participate, and
(ii) each employee eligible to participate in the plan may, subject to terms and conditions applicable to all participants, elect any benefit available under the plan.
(B) Certain employees may be excluded
For purposes of subparagraph (A)(i), an employer may elect to exclude under the plan employees—
(i) who have not attained the age of 21 before the close of a plan year,
(ii) who have less than 1 year of service with the employer as of any day during the plan year,
(iii) who are covered under an agreement which the Secretary of Labor finds to be a collective bargaining agreement if there is evidence that the benefits covered under the cafeteria plan were the subject of good faith bargaining between employee representatives and the employer, or
(iv) who are described in section 410(b)(3)(C) (relating to nonresident aliens working outside the United States).
A plan may provide a shorter period of service or younger age for purposes of clause (i) or (ii).
(5) Eligible employer
For purposes of this subsection—
(A) In general
The term "eligible employer" means, with respect to any year, any employer if such employer employed an average of 100 or fewer employees on business days during either of the 2 preceding years. For purposes of this subparagraph, a year may only be taken into account if the employer was in existence throughout the year.
(B) Employers not in existence during preceding year
If an employer was not in existence throughout the preceding year, the determination under subparagraph (A) shall be based on the average number of employees that it is reasonably expected such employer will employ on business days in the current year.
(C) Growing employers retain treatment as small employer
(i) In general
If—
(I) an employer was an eligible employer for any year (a "qualified year"), and
(II) such employer establishes a simple cafeteria plan for its employees for such year,
then, notwithstanding the fact the employer fails to meet the requirements of subparagraph (A) for any subsequent year, such employer shall be treated as an eligible employer for such subsequent year with respect to employees (whether or not employees during a qualified year) of any trade or business which was covered by the plan during any qualified year.
(ii) Exception
This subparagraph shall cease to apply if the employer employs an average of 200 or more employees on business days during any year preceding any such subsequent year.
(D) Special rules
(i) Predecessors
Any reference in this paragraph to an employer shall include a reference to any predecessor of such employer.
(ii) Aggregation rules
All persons treated as a single employer under subsection (a) or (b) of section 52, or subsection (n) or (o) of section 414, shall be treated as one person.
(6) Applicable nondiscrimination requirement
For purposes of this subsection, the term "applicable nondiscrimination requirement" means any requirement under subsection (b) of this section, section 79(d), section 105(h), or paragraph (2), (3), (4), or (8) of section 129(d).
(7) Compensation
The term "compensation" has the meaning given such term by section 414(s).
(k) Cross reference
For reporting and recordkeeping requirements, see section 6039D.
(l) Regulations
The Secretary shall prescribe such regulations as may be necessary to carry out the provisions of this section.
(Added
Amendment of Subsection (f)
(1) by striking "For purposes of this section, the term" and inserting "For purposes of this section—
"(1) In general
"The term";
(2) by striking "Such term shall not include" and inserting the following:
"(2) Long-term care insurance not qualified
"The term 'qualified benefit' shall not include"; and
(3) by adding at the end the following new paragraph:
(3) Certain exchange-participating qualified health plans not qualified
(A) In general
The term "qualified benefit" shall not include any qualified health plan (as defined in section 1301(a) of the Patient Protection and Affordable Care Act) offered through an Exchange established under section 1311 of such Act.
(B) Exception for exchange-eligible employers
Subparagraph (A) shall not apply with respect to any employee if such employee's employer is a qualified employer (as defined in section 1312(f)(2) of the Patient Protection and Affordable Care Act) offering the employee the opportunity to enroll through such an Exchange in a qualified health plan in a group market.
Amendment of Subsection (i)
(i) Limitation on health flexible spending arrangements
(1) In general
For purposes of this section, if a benefit is provided under a cafeteria plan through employer contributions to a health flexible spending arrangement, such benefit shall not be treated as a qualified benefit unless the cafeteria plan provides that an employee may not elect for any taxable year to have salary reduction contributions in excess of $2,500 made to such arrangement.
(2) Adjustment for inflation
In the case of any taxable year beginning after December 31, 2013, the dollar amount in paragraph (1) shall be increased by an amount equal to—
(A) such amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which such taxable year begins by substituting "calendar year 2012" for "calendar year 1992" in subparagraph (B) thereof.
If any increase determined under this paragraph is not a multiple of $50, such increase shall be rounded to the next lowest multiple of $50.
Codification
Prior Provisions
A prior section 125 was renumbered
Amendments
2010—Subsec. (i).
Subsec. (j).
Subsec. (k).
Subsec. (l).
2008—Subsecs. (h) to (j).
2007—Subsec. (b)(2).
2004—Subsec. (e)(1)(D).
2003—Subsec. (d)(2)(D).
1996—Subsec. (f).
1990—Subsec. (f).
1989—
Subsec. (d)(2).
Subsec. (e)(2)(A).
Subsec. (g)(3)(A).
1988—Subsec. (a).
"(1) amounts shall not be included in gross income of a participant in such plan solely because, under the plan, the participant may choose among the benefits of the plan, and
"(2) if the plan fails to meet the requirements of subsection (b) for any plan year—
"(A) paragraph (1) shall not apply, and
"(B) notwithstanding any other provision of part III of this subchapter, any qualified benefits received under such cafeteria plan by a highly compensated employee for such plan year shall be included in the gross income of such employee for the taxable year with or within which such plan year ends."
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (c)(1)(B).
"(i) among 2 or more benefits consisting of cash and qualified benefits, or
"(ii) among 2 or more qualified benefits."
Subsec. (c)(2)(B).
Subsec. (c)(2)(C).
Subsec. (e)(1).
Subsec. (e)(2)(A).
1986—
Subsecs. (c), (d)(1)(B).
Subsec. (f).
1984—Subsec. (b).
Subsec. (c).
Subsec. (d)(1).
Subsec. (f).
Subsec. (h).
Subsec. (i).
1980—Subsec. (d)(2).
Subsec. (g)(3)(B).
Subsec. (g)(4).
Effective Date of 2010 Amendment
Effective Date of 2008 Amendment
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2003 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by section 301(d) of
Amendment by section 321(c)(1) of
Effective Date of 1989 Amendments
Amendment by
Amendment by
Effective Date of 1988 Amendment
Amendment by sections 1011B(a)(11)–(13) and 1018(t)(6) of
Amendment by section 4002(b)(2) of
Section 6051(c) of
Effective Date of 1986 Amendment
Amendment by section 1151(d)(1) of
Amendment by section 1853(b)(1) of
Effective Date of 1984 Amendments
Amendment by
Amendment by
Amendment by
Effective Date of 1980 Amendments
Amendments by section 201(b)(2) of
Section 226(b) of
Amendment by
Effective Date of 1978 Amendment
Section 134(c) of
Savings Provision
For provisions that nothing in amendment by
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Treatment of Pre-1989 Elections for Dependent Care Assistance Under Cafeteria Plans
Section 6063 of
For provision that for purposes of section 125 of the Internal Revenue Code of 1986, a plan shall not be treated as failing to be a cafeteria plan solely because under the plan a participant elected before January 1, 1988, to receive reimbursement under the plan for dependent care assistance for periods after December 31, 1987, and such assistance included reimbursement for expenses at a camp where the dependent stays overnight, see section 10101(b)(2) of
Exception for Certain Cafeteria Plans and Benefits
Section 531(b)(5) of
"(A)
"(i) January 1, 1985, or
"(ii) the effective date of any modification to provide additional benefits after February 10, 1984.
"(B)
"(i) July 1, 1985, or
"(ii) the effective date of any modification to provide additional benefits after February 10, 1984.
Except as provided in Treasury regulations, the special transition rule is available only for benefits with respect to which, after December 31, 1984, contributions are fixed before the period of coverage and taxable cash is not available until the end of such period of coverage.
"(C)
"(D)
"(E)
1 So in original. Probably should be "subparagraph".
2 So in original. The comma probably should not appear.
§126. Certain cost-sharing payments
(a) General rule
Gross income does not include the excludable portion of payments received under—
(1) The rural clean water program authorized by section 208(j) of the Federal Water Pollution Control Act (
(2) The rural abandoned mine program authorized by section 406 of the Surface Mining Control and Reclamation Act of 1977 (
(3) The water bank program authorized by the Water Bank Act (
(4) The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978.
(5) The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act (
(6) The great plains conservation program authorized by section 16 1 of the Soil Conservation and Domestic Policy Act (
(7) The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act (
(8) The forestry incentives program authorized by section 4 of the Cooperative Forestry Assistance Act of 1978 (
(9) Any small watershed program administered by the Secretary of Agriculture which is determined by the Secretary of the Treasury or his delegate to be substantially similar to the type of programs described in paragraphs (1) through (8).
(10) Any program of a State, possession of the United States, a political subdivision of any of the foregoing, or the District of Columbia under which payments are made to individuals primarily for the purpose of conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife.
(b) Excludable portion
For purposes of this section—
(1) In general
The term "excludable portion" means that portion (or all) of a payment made to any person under any program described in subsection (a) which—
(A) is determined by the Secretary of Agriculture to be made primarily for the purpose of conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife, and
(B) is determined by the Secretary of the Treasury or his delegate as not increasing substantially the annual income derived from the property.
(2) Payments not chargeable to capital account
The term "excludable portion" does not include that portion of any payment which is properly associated with an amount which is allowable as a deduction for the taxable year in which such amount is paid or incurred.
(c) Election for section not to apply
(1) In general
The taxpayer may elect not to have this section (and section 1255) apply to any excludable portion (or portion thereof).
(2) Manner and time for making election
Any election under paragraph (1) shall be made in the manner prescribed by the Secretary by regulations and shall be made not later than the due date prescribed by law (including extensions) for filing the return of tax under this chapter for the taxable year in which the payment was received or accrued.
(d) Denial of double benefits
No deduction or credit shall be allowed with respect to any expenditure which is properly associated with any amount excluded from gross income under subsection (a).
(e) Basis of property not increased by reason of excludable payments
Notwithstanding any provision of section 1016 to the contrary, no adjustment to basis shall be made with respect to property acquired or improved through the use of any payment, to the extent that such adjustment would reflect any amount which is excluded from gross income under subsection (a).
(Added
References in Text
The Water Bank Act, referred to in subsec. (a)(3), is
The Agricultural Credit Act of 1978, referred to in subsec. (a)(4), is
The Soil Conservation and Domestic Allotment Act, referred to in subsec. (a)(5), (7), is act Apr. 27, 1935, ch. 85,
Section 16 of the Soil Conservation and Domestic Policy Act, referred to in subsec. (a)(6), probably means section 16 of the Soil Conservation and Domestic Allotment Act, which was classified to
The Bankhead-Jones Farm Tenant Act, referred to in subsec. (a)(7), is act July 22, 1937, ch. 517,
Prior Provisions
A prior section 126 was renumbered
Amendments
1980—Subsec. (a).
Subsec. (b).
Subsec. (c).
Subsecs. (d), (e).
Effective Date of 1980 Amendment
Amendment by
Effective Date
Section 543(d) of
1 See References in Text note below.
§127. Educational assistance programs
(a) Exclusion from gross income
(1) In general
Gross income of an employee does not include amounts paid or expenses incurred by the employer for educational assistance to the employee if the assistance is furnished pursuant to a program which is described in subsection (b).
(2) $5,250 maximum exclusion
If, but for this paragraph, this section would exclude from gross income more than $5,250 of educational assistance furnished to an individual during a calendar year, this section shall apply only to the first $5,250 of such assistance so furnished.
(b) Educational assistance program
(1) In general
For purposes of this section an educational assistance program is a separate written plan of an employer for the exclusive benefit of his employees to provide such employees with educational assistance. The program must meet the requirements of paragraphs (2) through (6) of this subsection.
(2) Eligibility
The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees who are highly compensated employees (within the meaning of section 414(q)) or their dependents. For purposes of this paragraph, there shall be excluded from consideration employees not included in the program who are included in a unit of employees covered by an agreement which the Secretary of Labor finds to be a collective bargaining agreement between employee representatives and one or more employers, if there is evidence that educational assistance benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
(3) Principal shareholders or owners
Not more than 5 percent of the amounts paid or incurred by the employer for educational assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.
(4) Other benefits as an alternative
A program must not provide eligible employees with a choice between educational assistance and other remuneration includible in gross income. For purposes of this section, the business practices of the employer (as well as the written program) will be taken into account.
(5) No funding required
A program referred to in paragraph (1) is not required to be funded.
(6) Notification of employees
Reasonable notification of the availability and terms of the program must be provided to eligible employees.
(c) Definitions; special rules
For purposes of this section—
(1) Educational assistance
The term "educational assistance" means—
(A) the payment, by an employer, of expenses incurred by or on behalf of an employee for education of the employee (including, but not limited to, tuition, fees, and similar payments, books, supplies, and equipment), and
(B) the provision, by an employer, of courses of instruction for such employee (including books, supplies, and equipment),
but does not include payment for, or the provision of, tools or supplies which may be retained by the employee after completion of a course of instruction, or meals, lodging, or transportation. The term "educational assistance" also does not include any payment for, or the provision of any benefits with respect to, any course or other education involving sports, games, or hobbies.
(2) Employee
The term "employee" includes, for any year, an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(3) Employer
An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (2).
(4) Attribution rules
(A) Ownership of stock
Ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)).
(B) Interest in unincorporated trade or business
The interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A).
(5) Certain tests not applicable
An educational assistance program shall not be held or considered to fail to meet any requirements of subsection (b) merely because—
(A) of utilization rates for the different types of educational assistance made available under the program; or
(B) successful completion, or attaining a particular course grade, is required for or considered in determining reimbursement under the program.
(6) Relationship to current law
This section shall not be construed to affect the deduction or inclusion in income of amounts (not within the exclusion under this section) which are paid or incurred, or received as reimbursement, for educational expenses under section 117, 162 or 212.
(7) Disallowance of excluded amounts as credit or deduction
No deduction or credit shall be allowed to the employee under any other section of this chapter for any amount excluded from income by reason of this section.
(d) Cross reference
For reporting and recordkeeping requirements, see section 6039D.
(Added
Amendment of Section
For termination of amendment by section 901 of
Prior Provisions
A prior section 127 was renumbered
Amendments
2001—Subsec. (c)(1).
Subsecs. (d), (e).
1999—Subsec. (d).
1997—Subsec. (d).
1996—Subsec. (c)(1).
Subsec. (d).
1993—Subsec. (d).
1991—Subsec. (d).
1990—Subsec. (c)(1).
Subsec. (d).
1989—Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (b)(6).
Subsec. (c)(8).
Subsec. (d).
1988—Subsec. (b)(2).
Subsec. (c)(1).
Subsec. (d).
1986—Subsec. (a)(2).
Subsec. (b)(1).
Subsec. (b)(2).
Subsec. (b)(6).
Subsec. (d).
1984—Subsec. (a).
Subsec. (c)(7).
Subsec. (c)(8).
Subsec. (d).
Subsec. (e).
Effective and Termination Dates of 2001 Amendment
Amendment by
Effective Date of 1999 Amendment
Effective Date of 1997 Amendment
Section 221(b) of
Effective Date of 1996 Amendment
Section 1202(c)(1), (2) of
"(1)
"(2)
Effective Date of 1993 Amendment
Section 13101(c)(1) of
Effective Date of 1991 Amendment
Section 103(b) of
Effective Date of 1990 Amendment
Section 11403(d) of
"(1)
"(2)
Effective Date of 1989 Amendments
Section 7101(c) of
Amendment by section 7814(a) of
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1011B(a)(31)(B) of
Amendment by section 4001(a), (b)(1) of
Effective Date of 1986 Amendment
Amendment by section 1114(b)(4) of
Amendment by section 1151(c)(4), (g)(3) of
Amendment by section 1162(a) of
Effective Date of 1984 Amendment
Section 1(g) of
"(1)
"(2)
"(3)
"(4)
"(5)
Effective Date
Section 164(d) of
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Expedited Procedures for Refunds of Overpayments
Section 1202(c)(3) of
Special Rule for Certain Taxable Years
Section 103(a)(2) of
Section 7101(a)(2) of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
[§128. Repealed. Pub. L. 101–508, title XI, §11801(a)(10), Nov. 5, 1990, 104 Stat. 1388–520 ]
Section, added and amended
A prior section 128 was renumbered
Savings Provision
For provisions that nothing in repeal by
§129. Dependent care assistance programs
(a) Exclusion
(1) In general
Gross income of an employee does not include amounts paid or incurred by the employer for dependent care assistance provided to such employee if the assistance is furnished pursuant to a program which is described in subsection (d).
(2) Limitation of exclusion
(A) In general
The amount which may be excluded under paragraph (1) for dependent care assistance with respect to dependent care services provided during a taxable year shall not exceed $5,000 ($2,500 in the case of a separate return by a married individual).
(B) Year of inclusion
The amount of any excess under subparagraph (A) shall be included in gross income in the taxable year in which the dependent care services were provided (even if payment of dependent care assistance for such services occurs in a subsequent taxable year).
(C) Marital status
For purposes of this paragraph, marital status shall be determined under the rules of paragraphs (3) and (4) of section 21(e).
(b) Earned income limitation
(1) In general
The amount excluded from the income of an employee under subsection (a) for any taxable year shall not exceed—
(A) in the case of an employee who is not married at the close of such taxable year, the earned income of such employee for such taxable year, or
(B) in the case of an employee who is married at the close of such taxable year, the lesser of—
(i) the earned income of such employee for such taxable year, or
(ii) the earned income of the spouse of such employee for such taxable year.
(2) Special rule for certain spouses
For purposes of paragraph (1), the provisions of section 21(d)(2) shall apply in determining the earned income of a spouse who is a student or incapable of caring for himself.
(c) Payments to related individuals
No amount paid or incurred during the taxable year of an employee by an employer in providing dependent care assistance to such employee shall be excluded under subsection (a) if such amount was paid or incurred to an individual—
(1) with respect to whom, for such taxable year, a deduction is allowable under section 151(c) (relating to personal exemptions for dependents) to such employee or the spouse of such employee, or
(2) who is a child of such employee (within the meaning of section 152(f)(1)) under the age of 19 at the close of such taxable year.
(d) Dependent care assistance program
(1) In general
For purposes of this section a dependent care assistance program is a separate written plan of an employer for the exclusive benefit of his employees to provide such employees with dependent care assistance which meets the requirements of paragraphs (2) through (8) of this subsection. If any plan would qualify as a dependent care assistance program but for a failure to meet the requirements of this subsection, then, notwithstanding such failure, such plan shall be treated as a dependent care assistance program in the case of employees who are not highly compensated employees.
(2) Discrimination
The contributions or benefits provided under the plan shall not discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)) or their dependents.
(3) Eligibility
The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees described in paragraph (2), or their dependents.
(4) Principal shareholders or owners
Not more than 25 percent of the amounts paid or incurred by the employer for dependent care assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer.
(5) No funding required
A program referred to in paragraph (1) is not required to be funded.
(6) Notification of eligible employees
Reasonable notification of the availability and terms of the program shall be provided to eligible employees.
(7) Statement of expenses
The plan shall furnish to an employee, on or before January 31, a written statement showing the amounts paid or expenses incurred by the employer in providing dependent care assistance to such employee during the previous calendar year.
(8) Benefits
(A) In general
A plan meets the requirements of this paragraph if the average benefits provided to employees who are not highly compensated employees under all plans of the employer is at least 55 percent of the average benefits provided to highly compensated employees under all plans of the employer.
(B) Salary reduction agreements
For purposes of subparagraph (A), in the case of any benefits provided through a salary reduction agreement, a plan may disregard any employees whose compensation is less than $25,000. For purposes of this subparagraph, the term "compensation" has the meaning given such term by section 414(q)(4), except that, under rules prescribed by the Secretary, an employer may elect to determine compensation on any other basis which does not discriminate in favor of highly compensated employees.
(9) Excluded employees
For purposes of paragraphs (3) and (8), there shall be excluded from consideration—
(A) subject to rules similar to the rules of section 410(b)(4), employees who have not attained the age of 21 and completed 1 year of service (as defined in section 410(a)(3)), and
(B) employees not included in a dependent care assistance program who are included in a unit of employees covered by an agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and 1 or more employees, if there is evidence that dependent care benefits were the subject of good faith bargaining between such employee representatives and such employer or employers.
(e) Definitions and special rules
For purposes of this section—
(1) Dependent care assistance
The term "dependent care assistance" means the payment of, or provision of, those services which if paid for by the employee would be considered employment-related expenses under section 21(b)(2) (relating to expenses for household and dependent care services necessary for gainful employment).
(2) Earned income
The term "earned income" shall have the meaning given such term in section 32(c)(2), but such term shall not include any amounts paid or incurred by an employer for dependent care assistance to an employee.
(3) Employee
The term "employee" includes, for any year, an individual who is an employee within the meaning of section 401(c)(1) (relating to self-employed individuals).
(4) Employer
An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (3).
(5) Attribution rules
(A) Ownership of stock
Ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)).
(B) Interest in unincorporated trade or business
The interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A).
(6) Utilization test not applicable
A dependent care assistance program shall not be held or considered to fail to meet any requirements of subsection (d) (other than paragraphs (4) and (8) thereof) merely because of utilization rates for the different types of assistance made available under the program.
(7) Disallowance of excluded amounts as credit or deduction
No deduction or credit shall be allowed to the employee under any other section of this chapter for any amount excluded from the gross income of the employee by reason of this section.
(8) Treatment of onsite facilities
In the case of an onsite facility maintained by an employer, except to the extent provided in regulations, the amount of dependent care assistance provided to an employee excluded with respect to any dependent shall be based on—
(A) utilization of the facility by a dependent of the employee, and
(B) the value of the services provided with respect to such dependent.
(9) Identifying information required with respect to service provider
No amount paid or incurred by an employer for dependent care assistance provided to an employee shall be excluded from the gross income of such employee unless—
(A) the name, address, and taxpayer identification number of the person performing the services are included on the return to which the exclusion relates, or
(B) if such person is an organization described in section 501(c)(3) and exempt from tax under section 501(a), the name and address of such person are included on the return to which the exclusion relates.
In the case of a failure to provide the information required under the preceding sentence, the preceding sentence shall not apply if it is shown that the taxpayer exercised due diligence in attempting to provide the information so required.
(Added
Codification
Prior Provisions
A prior section 129 was renumbered
Amendments
2004—Subsec. (c)(2).
1996—Subsec. (d)(8)(B).
1989—Subsec. (a).
Subsec. (d)(1).
Subsec. (d)(3).
Subsec. (d)(6).
Subsec. (d)(7).
Subsec. (d)(8).
Subsec. (d)(9).
Subsec. (e)(6).
1988—Subsec. (a)(2).
Subsec. (d)(1)(B).
Subsec. (d)(3).
Subsec. (d)(7).
Subsec. (d)(7)(A).
Subsec. (d)(7)(B).
Subsec. (d)(8).
Subsec. (e)(6).
Subsec. (e)(8).
Subsec. (e)(9).
1986—Subsec. (a).
Subsec. (c)(1).
Subsec. (c)(2).
Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3).
Subsec. (d)(6), (7).
Subsec. (d)(8).
Subsec. (e)(8).
1984—Subsec. (b)(2).
Subsec. (e)(1).
Subsec. (e)(2).
1983—Subsec. (d)(1).
Subsec. (d)(2).
Subsec. (d)(3).
Subsec. (d)(4) to (7).
Subsec. (e)(7).
Effective Date of 2004 Amendment
Amendment by
Effective Date of 1996 Amendment
Amendment by
Effective Date of 1989 Amendments
Amendment by
Amendment by section 203(a)(1), (2) of
Section 204(a)(3)(D) of
Section 204(d)(1), (2) of
"(1) The amendments made by subsections (a)(1), (a)(2), and (b)(2) [amending this section and
"(2) The amendments made by subsection (a)(3) [amending this section] shall apply to plan years beginning after December 31, 1989."
Effective Date of 1988 Amendments
Amendment by section 1011B(a)(14), (15), (18), (30), (31)(A), (c)(1) of
Section 1011B(c)(2)(C) of
"(i) Except as provided in this subparagraph, the amendments made by this paragraph [amending this section and
"(ii) A taxpayer may elect to have the amendment made by subparagraph (A) [amending this section] apply to taxable years beginning in 1987.
"(iii) In the case of a taxpayer not making an election under clause (ii), any dependent care assistance provided in a taxable year beginning in 1987 with respect to which reimbursement was not received in such taxable year shall be treated as provided in the taxpayer's first taxable year beginning after December 31, 1987."
Section 3021(d) of
"(1)
"(2)
Amendment by
Effective Date of 1986 Amendment
Amendment by section 104(b)(1) of
Amendment by section 1114(b)(4) of
Amendment by section 1151(c)(5), (f), (g)(4) of
Section 1163(c) of
Effective Date of 1984 Amendment
Amendment by
Effective Date of 1983 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1981, see section 124(f) of
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1998
For provisions directing that if any amendments made by subtitle D [§§1401–1465] of title I of
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
§130. Certain personal injury liability assignments
(a) In general
Any amount received for agreeing to a qualified assignment shall not be included in gross income to the extent that such amount does not exceed the aggregate cost of any qualified funding assets.
(b) Treatment of qualified funding asset
In the case of any qualified funding asset—
(1) the basis of such asset shall be reduced by the amount excluded from gross income under subsection (a) by reason of the purchase of such asset, and
(2) any gain recognized on a disposition of such asset shall be treated as ordinary income.
(c) Qualified assignment
For purposes of this section, the term "qualified assignment" means any assignment of a liability to make periodic payments as damages (whether by suit or agreement), or as compensation under any workmen's compensation act, on account of personal injury or sickness (in a case involving physical injury or physical sickness)—
(1) if the assignee assumes such liability from a person who is a party to the suit or agreement, or the workmen's compensation claim, and
(2) if—
(A) such periodic payments are fixed and determinable as to amount and time of payment,
(B) such periodic payments cannot be accelerated, deferred, increased, or decreased by the recipient of such payments,
(C) the assignee's obligation on account of the personal injuries or sickness is no greater than the obligation of the person who assigned the liability, and
(D) such periodic payments are excludable from the gross income of the recipient under paragraph (1) or (2) of section 104(a).
The determination for purposes of this chapter of when the recipient is treated as having received any payment with respect to which there has been a qualified assignment shall be made without regard to any provision of such assignment which grants the recipient rights as a creditor greater than those of a general creditor.
(d) Qualified funding asset
For purposes of this section, the term "qualified funding asset" means any annuity contract issued by a company licensed to do business as an insurance company under the laws of any State, or any obligation of the United States, if—
(1) such annuity contract or obligation is used by the assignee to fund periodic payments under any qualified assignment,
(2) the periods of the payments under the annuity contract or obligation are reasonably related to the periodic payments under the qualified assignment, and the amount of any such payment under the contract or obligation does not exceed the periodic payment to which it relates,
(3) such annuity contract or obligation is designated by the taxpayer (in such manner as the Secretary shall by regulations prescribe) as being taken into account under this section with respect to such qualified assignment, and
(4) such annuity contract or obligation is purchased by the taxpayer not more than 60 days before the date of the qualified assignment and not later than 60 days after the date of such assignment.
(Added
Prior Provisions
A prior section 130 was renumbered
Amendments
1997—Subsec. (c).
Subsec. (c)(1).
Subsec. (c)(2)(D).
1988—Subsec. (c).
1986—Subsec. (c).
Effective Date of 1997 Amendment
Section 962(b) of
Effective Date of 1988 Amendment
Section 6079(b)(2) of
Effective Date of 1986 Amendment
Section 1002(b) of
Effective Date
Section 101(c) of
§131. Certain foster care payments
(a) General rule
Gross income shall not include amounts received by a foster care provider during the taxable year as qualified foster care payments.
(b) Qualified foster care payment defined
For purposes of this section—
(1) In general
The term "qualified foster care payment" means any payment made pursuant to a foster care program of a State or political subdivision thereof—
(A) which is paid by—
(i) a State or political subdivision thereof, or
(ii) a qualified foster care placement agency, and
(B) which is—
(i) paid to the foster care provider for caring for a qualified foster individual in the foster care provider's home, or
(ii) a difficulty of care payment.
(2) Qualified foster individual
The term "qualified foster individual" means any individual who is living in a foster family home in which such individual was placed by—
(A) an agency of a State or political subdivision thereof, or
(B) a qualified foster care placement agency.
(3) Qualified foster care placement agency
The term "qualified foster care placement agency" means any placement agency which is licensed or certified by—
(A) a State or political subdivision thereof, or
(B) an entity designated by a State or political subdivision thereof,
for the foster care program of such State or political subdivision to make foster care payments to providers of foster care.
(4) Limitation based on number of individuals over the age of 18
In the case of any foster home in which there is a qualified foster care individual who has attained age 19, foster care payments (other than difficulty of care payments) for any period to which such payments relate shall not be excludable from gross income under subsection (a) to the extent such payments are made for more than 5 such qualified foster individuals.
(c) Difficulty of care payments
For purposes of this section—
(1) Difficulty of care payments
The term "difficulty of care payments" means payments to individuals which are not described in subsection (b)(1)(B)(i), and which—
(A) are compensation for providing the additional care of a qualified foster individual which is—
(i) required by reason of a physical, mental, or emotional handicap of such individual with respect to which the State has determined that there is a need for additional compensation, and
(ii) provided in the home of the foster care provider, and
(B) are designated by the payor as compensation described in subparagraph (A).
(2) Limitation based on number of individuals
In the case of any foster home, difficulty of care payments for any period to which such payments relate shall not be excludable from gross income under subsection (a) to the extent such payments are made for more than—
(A) 10 qualified foster individuals who have not attained age 19, and
(B) 5 qualified foster individuals not described in subparagraph (A).
(Added
Prior Provisions
A prior section 131 was renumbered
Amendments
2002—Subsec. (b)(1).
"(A) which is paid by a State or political subdivision thereof or by a placement agency which is described in section 501(c)(3) and exempt from tax under section 501(a), and".
Subsec. (b)(2)(B).
Subsec. (b)(3), (4).
1986—Subsec. (a).
Subsec. (b).
"(A) which is paid by a State or political subdivision thereof or by a child-placing agency which is described in section 501(c)(3) and exempt from tax under section 501(a), and
"(B) which is—
"(i) paid to reimburse the foster parent for the expenses of caring for a qualified foster child in the foster parent's home, or
"(ii) a difficulty of care payment."
and par. (2) "Qualified foster child" read as follows: "The term 'qualified foster child' means any individual who—
"(A) has not attained age 19, and
"(B) is living in a foster family home in which such individual was placed by—
"(i) an agency of a State or political subdivision thereof, or
"(ii) an organization which is licensed by a State (or political subdivision thereof) as a child-placing agency and which is described in section 501(c)(3) and exempt from tax under section 501(a)."
Subsec. (c).
Effective Date of 2002 Amendment
Effective Date of 1986 Amendment
Section 1707(b) of
Effective Date
Section 102(c) of
§132. Certain fringe benefits
(a) Exclusion from gross income
Gross income shall not include any fringe benefit which qualifies as a—
(1) no-additional-cost service,
(2) qualified employee discount,
(3) working condition fringe,
(4) de minimis fringe,
(5) qualified transportation fringe,
(6) qualified moving expense reimbursement,
(7) qualified retirement planning services, or
(8) qualified military base realignment and closure fringe.
(b) No-additional-cost service defined
For purposes of this section, the term "no-additional-cost service" means any service provided by an employer to an employee for use by such employee if—
(1) such service is offered for sale to customers in the ordinary course of the line of business of the employer in which the employee is performing services, and
(2) the employer incurs no substantial additional cost (including forgone revenue) in providing such service to the employee (determined without regard to any amount paid by the employee for such service).
(c) Qualified employee discount defined
For purposes of this section—
(1) Qualified employee discount
The term "qualified employee discount" means any employee discount with respect to qualified property or services to the extent such discount does not exceed—
(A) in the case of property, the gross profit percentage of the price at which the property is being offered by the employer to customers, or
(B) in the case of services, 20 percent of the price at which the services are being offered by the employer to customers.
(2) Gross profit percentage
(A) In general
The term "gross profit percentage" means the percent which—
(i) the excess of the aggregate sales price of property sold by the employer to customers over the aggregate cost of such property to the employer, is of
(ii) the aggregate sale price of such property.
(B) Determination of gross profit percentage
Gross profit percentage shall be determined on the basis of—
(i) all property offered to customers in the ordinary course of the line of business of the employer in which the employee is performing services (or a reasonable classification of property selected by the employer), and
(ii) the employer's experience during a representative period.
(3) Employee discount defined
The term "employee discount" means the amount by which—
(A) the price at which the property or services are provided by the employer to an employee for use by such employee, is less than
(B) the price at which such property or services are being offered by the employer to customers.
(4) Qualified property or services
The term "qualified property or services" means any property (other than real property and other than personal property of a kind held for investment) or services which are offered for sale to customers in the ordinary course of the line of business of the employer in which the employee is peforming 1 services.
(d) Working condition fringe defined
For purposes of this section, the term "working condition fringe" means any property or services provided to an employee of the employer to the extent that, if the employee paid for such property or services, such payment would be allowable as a deduction under section 162 or 167.
(e) De minimis fringe defined
For purposes of this section—
(1) In general
The term "de minimis fringe" means any property or service the value of which is (after taking into account the frequency with which similar fringes are provided by the employer to the employer's employees) so small as to make accounting for it unreasonable or administratively impracticable.
(2) Treatment of certain eating facilities
The operation by an employer of any eating facility for employees shall be treated as a de minimis fringe if—
(A) such facility is located on or near the business premises of the employer, and
(B) revenue derived from such facility normally equals or exceeds the direct operating costs of such facility.
The preceding sentence shall apply with respect to any highly compensated employee only if access to the facility is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees. For purposes of subparagraph (B), an employee entitled under section 119 to exclude the value of a meal provided at such facility shall be treated as having paid an amount for such meal equal to the direct operating costs of the facility attributable to such meal.
(f) Qualified transportation fringe
(1) In general
For purposes of this section, the term "qualified transportation fringe" means any of the following provided by an employer to an employee:
(A) Transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee's residence and place of employment.
(B) Any transit pass.
(C) Qualified parking.
(D) Any qualified bicycle commuting reimbursement.
(2) Limitation on exclusion
The amount of the fringe benefits which are provided by an employer to any employee and which may be excluded from gross income under subsection (a)(5) shall not exceed—
(A) $100 per month in the case of the aggregate of the benefits described in subparagraphs (A) and (B) of paragraph (1),
(B) $175 per month in the case of qualified parking, and
(C) the applicable annual limitation in the case of any qualified bicycle commuting reimbursement.
In the case of any month beginning on or after the date of the enactment of this sentence and before January 1, 2012, subparagraph (A) shall be applied as if the dollar amount therein were the same as the dollar amount in effect for such month under subparagraph (B).
(3) Cash reimbursements
For purposes of this subsection, the term "qualified transportation fringe" includes a cash reimbursement by an employer to an employee for a benefit described in paragraph (1). The preceding sentence shall apply to a cash reimbursement for any transit pass only if a voucher or similar item which may be exchanged only for a transit pass is not readily available for direct distribution by the employer to the employee.
(4) No constructive receipt
No amount shall be included in the gross income of an employee solely because the employee may choose between any qualified transportation fringe (other than a qualified bicycle commuting reimbursement) and compensation which would otherwise be includible in gross income of such employee.
(5) Definitions
For purposes of this subsection—
(A) Transit pass
The term "transit pass" means any pass, token, farecard, voucher, or similar item entitling a person to transportation (or transportation at a reduced price) if such transportation is—
(i) on mass transit facilities (whether or not publicly owned), or
(ii) provided by any person in the business of transporting persons for compensation or hire if such transportation is provided in a vehicle meeting the requirements of subparagraph (B)(i).
(B) Commuter highway vehicle
The term "commuter highway vehicle" means any highway vehicle—
(i) the seating capacity of which is at least 6 adults (not including the driver), and
(ii) at least 80 percent of the mileage use of which can reasonably be expected to be—
(I) for purposes of transporting employees in connection with travel between their residences and their place of employment, and
(II) on trips during which the number of employees transported for such purposes is at least ½ of the adult seating capacity of such vehicle (not including the driver).
(C) Qualified parking
The term "qualified parking" means parking provided to an employee on or near the business premises of the employer or on or near a location from which the employee commutes to work by transportation described in subparagraph (A), in a commuter highway vehicle, or by carpool. Such term shall not include any parking on or near property used by the employee for residential purposes.
(D) Transportation provided by employer
Transportation referred to in paragraph (1)(A) shall be considered to be provided by an employer if such transportation is furnished in a commuter highway vehicle operated by or for the employer.
(E) Employee
For purposes of this subsection, the term "employee" does not include an individual who is an employee within the meaning of section 401(c)(1).
(F) Definitions related to bicycle commuting reimbursement
(i) Qualified bicycle commuting reimbursement
The term "qualified bicycle commuting reimbursement" means, with respect to any calendar year, any employer reimbursement during the 15-month period beginning with the first day of such calendar year for reasonable expenses incurred by the employee during such calendar year for the purchase of a bicycle and bicycle improvements, repair, and storage, if such bicycle is regularly used for travel between the employee's residence and place of employment.
(ii) Applicable annual limitation
The term "applicable annual limitation" means, with respect to any employee for any calendar year, the product of $20 multiplied by the number of qualified bicycle commuting months during such year.
(iii) Qualified bicycle commuting month
The term "qualified bicycle commuting month" means, with respect to any employee, any month during which such employee—
(I) regularly uses the bicycle for a substantial portion of the travel between the employee's residence and place of employment, and
(II) does not receive any benefit described in subparagraph (A), (B), or (C) of paragraph (1).
(6) Inflation adjustment
(A) In general
In the case of any taxable year beginning in a calendar year after 1999, the dollar amounts contained in subparagraphs (A) and (B) of paragraph (2) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, by substituting "calendar year 1998" for "calendar year 1992".
In the case of any taxable year beginning in a calendar year after 2002, clause (ii) shall be applied by substituting "calendar year 2001" for "calendar year 1998" for purposes of adjusting the dollar amount contained in paragraph (2)(A).
(B) Rounding
If any increase determined under subparagraph (A) is not a multiple of $5, such increase shall be rounded to the next lowest multiple of $5.
(7) Coordination with other provisions
For purposes of this section, the terms "working condition fringe" and "de minimis fringe" shall not include any qualified transportation fringe (determined without regard to paragraph (2)).
(g) Qualified moving expense reimbursement
For purposes of this section, the term "qualified moving expense reimbursement" means any amount received (directly or indirectly) by an individual from an employer as a payment for (or a reimbursement of) expenses which would be deductible as moving expenses under section 217 if directly paid or incurred by the individual. Such term shall not include any payment for (or reimbursement of) an expense actually deducted by the individual in a prior taxable year.
(h) Certain individuals treated as employees for purposes of subsections (a)(1) and (2)
For purposes of paragraphs (1) and (2) of subsection (a)—
(1) Retired and disabled employees and surviving spouse of employee treated as employee
With respect to a line of business of an employer, the term "employee" includes—
(A) any individual who was formerly employed by such employer in such line of business and who separated from service with such employer in such line of business by reason of retirement or disability, and
(B) any widow or widower of any individual who died while employed by such employer in such line of business or while an employee within the meaning of subparagraph (A).
(2) Spouse and dependent children
(A) In general
Any use by the spouse or a dependent child of the employee shall be treated as use by the employee.
(B) Dependent child
For purposes of subparagraph (A), the term "dependent child" means any child (as defined in section 152(f)(1)) of the employee—
(i) who is a dependent of the employee, or
(ii) both of whose parents are deceased and who has not attained age 25.
For purposes of the preceding sentence, any child to whom section 152(e) applies shall be treated as the dependent of both parents.
(3) Special rule for parents in the case of air transportation
Any use of air transportation by a parent of an employee (determined without regard to paragraph (1)(B)) shall be treated as use by the employee.
(i) Reciprocal agreements
For purposes of paragraph (1) of subsection (a), any service provided by an employer to an employee of another employer shall be treated as provided by the employer of such employee if—
(1) such service is provided pursuant to a written agreement between such employers, and
(2) neither of such employers incurs any substantial additional costs (including foregone revenue) in providing such service or pursuant to such agreement.
(j) Special rules
(1) Exclusions under subsection (a)(1) and (2) apply to highly compensated employees only if no discrimination
Paragraphs (1) and (2) of subsection (a) shall apply with respect to any fringe benefit described therein provided with respect to any highly compensated employee only if such fringe benefit is available on substantially the same terms to each member of a group of employees which is defined under a reasonable classification set up by the employer which does not discriminate in favor of highly compensated employees.
(2) Special rule for leased sections of department stores
(A) In general
For purposes of paragraph (2) of subsection (a), in the case of a leased section of a department store—
(i) such section shall be treated as part of the line of business of the person operating the department store, and
(ii) employees in the leased section shall be treated as employees of the person operating the department store.
(B) Leased section of department store
For purposes of subparagraph (A), a leased section of a department store is any part of a department store where over-the-counter sales of property are made under a lease or similar arrangement where it appears to the general public that individuals making such sales are employed by the person operating the department store.
(3) Auto salesmen
(A) In general
For purposes of subsection (a)(3), qualified automobile demonstration use shall be treated as a working condition fringe.
(B) Qualified automobile demonstration use
For purposes of subparagraph (A), the term "qualified automobile demonstration use" means any use of an automobile by a full-time automobile salesman in the sales area in which the automobile dealer's sales office is located if—
(i) such use is provided primarily to facilitate the salesman's performance of services for the employer, and
(ii) there are substantial restrictions on the personal use of such automobile by such salesman.
(4) On-premises gyms and other athletic facilities
(A) In general
Gross income shall not include the value of any on-premises athletic facility provided by an employer to his employees.
(B) On-premises athletic facility
For purposes of this paragraph, the term "on-premises athletic facility" means any gym or other athletic facility—
(i) which is located on the premises of the employer,
(ii) which is operated by the employer, and
(iii) substantially all the use of which is by employees of the employer, their spouses, and their dependent children (within the meaning of subsection (h)).
(5) Special rule for affiliates of airlines
(A) In general
If—
(i) a qualified affiliate is a member of an affiliated group another member of which operates an airline, and
(ii) employees of the qualified affiliate who are directly engaged in providing airline-related services are entitled to no-additional-cost service with respect to air transportation provided by such other member,
then, for purposes of applying paragraph (1) of subsection (a) to such no-additional-cost service provided to such employees, such qualified affiliate shall be treated as engaged in the same line of business as such other member.
(B) Qualified affiliate
For purposes of this paragraph, the term "qualified affiliate" means any corporation which is predominantly engaged in airline-related services.
(C) Airline-related services
For purposes of this paragraph, the term "airline-related services" means any of the following services provided in connection with air transportation:
(i) Catering.
(ii) Baggage handling.
(iii) Ticketing and reservations.
(iv) Flight planning and weather analysis.
(v) Restaurants and gift shops located at an airport.
(vi) Such other similar services provided to the airline as the Secretary may prescribe.
(D) Affiliated group
For purposes of this paragraph, the term "affiliated group" has the meaning given such term by section 1504(a).
(6) Highly compensated employee
For purposes of this section, the term "highly compensated employee" has the meaning given such term by section 414(q).
(7) Air cargo
For purposes of subsection (b), the transportation of cargo by air and the transportation of passengers by air shall be treated as the same service.
(8) Application of section to otherwise taxable educational or training benefits
Amounts paid or expenses incurred by the employer for education or training provided to the employee which are not excludable from gross income under section 127 shall be excluded from gross income under this section if (and only if) such amounts or expenses are a working condition fringe.
(k) Customers not to include employees
For purposes of this section (other than subsection (c)(2)), the term "customers" shall only include customers who are not employees.
(l) Section not to apply to fringe benefits expressly provided for elsewhere
This section (other than subsections (e) and (g)) shall not apply to any fringe benefits of a type the tax treatment of which is expressly provided for in any other section of this chapter.
(m) Qualified retirement planning services
(1) In general
For purposes of this section, the term "qualified retirement planning services" means any retirement planning advice or information provided to an employee and his spouse by an employer maintaining a qualified employer plan.
(2) Nondiscrimination rule
Subsection (a)(7) shall apply in the case of highly compensated employees only if such services are available on substantially the same terms to each member of the group of employees normally provided education and information regarding the employer's qualified employer plan.
(3) Qualified employer plan
For purposes of this subsection, the term "qualified employer plan" means a plan, contract, pension, or account described in section 219(g)(5).
(n) Qualified military base realignment and closure fringe
For purposes of this section—
(1) In general
The term "qualified military base realignment and closure fringe" means 1 or more payments under the authority of section 1013 of the Demonstration Cities and Metropolitan Development Act of 1966 (
(2) Limitation
With respect to any property, such term shall not include any payment referred to in paragraph (1) to the extent that the sum of all of such payments related to such property exceeds the maximum amount described in subsection (c) of such section (as in effect on such date).
(o) Regulations
The Secretary shall prescribe such regulations as may be necessary or appropriate to carry out the purposes of this section.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
References in Text
The date of the enactment of this sentence, referred to in subsec. (f)(2), is the date of enactment of
The date of the enactment of the American Recovery and Reinvestment Tax Act of 2009, referred to in subsec. (n)(1), is the date of enactment of
Prior Provisions
A prior section 132 was renumbered
Amendments
2010—Subsec. (f)(2).
2009—Subsec. (f)(2).
Subsec. (n)(1).
Subsec. (n)(2).
2008—Subsec. (f)(1)(D).
Subsec. (f)(2)(C).
Subsec. (f)(4).
Subsec. (f)(5)(F).
2004—Subsec. (h)(2)(B).
2003—Subsec. (a)(8).
Subsecs. (n), (o).
2001—Subsec. (a)(7).
Subsecs. (m), (n).
1998—Subsec. (f)(2)(A).
Subsec. (f)(2)(B).
Subsec. (f)(4).
Subsec. (f)(6).
"(A) such dollar amount, multiplied by
"(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins.
If any increase determined under the preceding sentence is not a multiple of $5, such increase shall be rounded to the next lowest multiple of $5."
Subsec. (f)(6)(A).
1997—Subsec. (e)(2).
Subsec. (f)(4).
1993—Subsec. (a)(6).
Subsec. (f)(6)(B).
Subsecs. (g), (h).
Subsec. (i).
Subsec. (i)(8).
Subsec. (j).
Subsec. (j)(4)(B)(iii).
Subsec. (k).
Subsec. (l).
Subsec. (m).
1992—Subsec. (a)(5).
Subsecs. (f) to (h).
Subsec. (i).
Subsecs. (j) to (l).
1989—Subsec. (f)(2)(B).
Subsec. (h)(1).
Subsec. (h)(9).
1988—Subsec. (h)(1).
Subsec. (h)(8).
1986—Subsec. (c)(3)(A).
Subsec. (e)(2).
Subsec. (f)(2)(B)(ii).
Subsec. (f)(3).
Subsec. (g).
Subsec. (h)(1).
Subsec. (h)(3)(B)(i).
Subsec. (h)(6).
Subsec. (h)(7).
Subsec. (i).
Effective Date of 2010 Amendment
Effective Date of 2009 Amendment
Effective Date of 2008 Amendment
Effective Date of 2004 Amendment
Amendment by
Effective Date of 2003 Amendment
Effective Date of 2001 Amendment
Effective Date of 1998 Amendment
Effective Date of 1997 Amendment
Section 970(b) of
Section 1072(b) of
Effective Date of 1993 Amendment
Section 13101(c)(2) of
Amendment by section 13201(b)(3)(F) of
Amendment by section 13213(d)(1), (2), (3)(B) and (C) of
Effective Date of 1992 Amendment
Section 1911(d) of
Effective Date of 1989 Amendments
Amendment by section 7101(b) of
Amendment by
Effective Date of 1988 Amendment
Amendment by section 1011B(a)(31)(B) of
Section 6066(b) of
Effective Date of 1986 Amendments
Amendment by section 1114(b)(5) of
Amendment by section 1151(e)(2)(A), (g)(5) of
Amendment by section 1853(a) of
Section 13207(a)(2) of
Section 13207(b)(2) of
Effective Date
Section 531(i) of
Regulations
Secretary of the Treasury or his delegate to issue before Feb. 1, 1988, final regulations to carry out amendments made by section 1114 of
Nonenforcement of Amendment Made by Section 1151 of Pub. L. 99–514 for Fiscal Year 1990
No monies appropriated by
Plan Amendments Not Required Until January 1, 1989
For provisions directing that if any amendments made by subtitle A or subtitle C of title XI [§§1101–1147 and 1171–1177] or title XVIII [§§1800–1899A] of
Certain Recordkeeping Requirements
Section 1567 of
"(a)
"(b)
Treatment of Certain Leased Operations of Department Stores
Section 1853(e) of
Transitional Rule for Determination of Line of Business in Case of Affiliated Group Operating Airline
Section 13207(c) of
"(1) an individual—
"(A) was an employee (within the meaning of section 132 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954], including subsection (f) [now (h)] thereof) of one member of an affiliated group (as defined in section 1504 of such Code), hereinafter referred to as the 'first corporation', and
"(B) was eligible for no-additional-cost service in the form of air transportation provided by another member of such affiliated group, hereinafter referred to as the 'second corporation',
"(2) at least 50 percent of the individuals performing service for the first corporation were or had been employees of, or had previously performed services for, the second corporation, and
"(3) the primary business of the affiliated group was air transportation of passengers,
then, for purposes of applying paragraphs (1) and (2) of section 132(a) of the Internal Revenue Code of 1986, with respect to no-additional-cost services and qualified employee discounts provided after December 31, 1984, for such individual by the second corporation, the first corporation shall be treated as engaged in the same air transportation line of business as the second corporation. For purposes of the preceding sentence, an employee of the second corporation who is performing services for the first corporation shall also be treated as an employee of the first corporation."
Special Rule for Services Related To Providing Air Transportation
Section 531(g) of
"(1)
"(A) an individual performs services for a qualified air transportation organization, and
"(B) such services are performed primarily for persons engaged in providing air transportation and are of the kind which (if performed on September 12, 1984) would qualify such individual for no-additional-cost services in the form of air transportation,
then, with respect to such individual, such qualified air transportation organization shall be treated as engaged in the line of business of providing air transportation.
"(2)
"(A) if such organization (or a predecessor) was in existence on September 12, 1984,
"(B) if—
"(i) such organization is described in section 501(c)(6) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] and the membership of such organization is limited to entities engaged in the transportation by air of individuals or property for compensation or hire, or
"(ii) such organization is a corporation all the stock of which is owned entirely by entities referred to in clause (i), and
"(C) if such organization is operated in furtherance of the activities of its members or owners."
Determination of Line of Business in Case of Affiliated Group Operating Retail Department Stores
Section 531(f) of
"(1) as of October 5, 1983, the employees of one member of an affiliated group (as defined in section 1504 of the Internal Revenue Code of 1986 [formerly I.R.C. 1954] without regard to subsections (b)(2) and (b)(4) thereof) were entitled to employee discounts at the retail department stores operated by another member of such affiliated group, and
"(2) the primary business of the affiliated group is the operation of retail department stores,
then, for purpose of applying section 132(a)(2) of the Internal Revenue Code of 1986, with respect to discounts provided for such employees at the retail department stores operated by such other member, the employer shall be treated as engaged in the same line of business as such other member."
1 So in original. Probably should be "performing".
[§133. Repealed. Pub. L. 104–188, title I, §1602(a), Aug. 20, 1996, 110 Stat. 1833 ]
Section, added
§133. Interest on certain loans used to acquire employer securities
(a)
Gross income does not include 50 percent of the interest received by—
(1) a bank (within the meaning of section 581),
(2) an insurance company to which subchapter L applies,
(3) a corporation actively engaged in the business of lending money, or
(4) a regulated investment company (as defined in section 851),
with respect to a securities acquisition loan.
(b)
(1)
For purposes of this section, the term "securities acquisition loan" means—
(A) any loan to a corporation or to an employee stock ownership plan to the extent that the proceeds are used to acquire employer securities for the plan, or
(B) any loan to a corporation to the extent that, within 30 days, employer securities are transferred to the plan in an amount equal to the proceeds of such loan and such securities are allocable to accounts of plan participants within 1 year of the date of such loan.
For purposes of this paragraph, the term "employer securities" has the meaning given such term by section 409(l). The term "securities acquisition loan" shall not include a loan with a term greater than 15 years.
(2)
The term "securities acquisition loan" shall not include—
(A) any loan made between corporations which are members of the same controlled group of corporations, or
(B) any loan made between an employee stock ownership plan and any person that is—
(i) the employer of any employees who are covered by the plan; or
(ii) a member of a controlled group of corporations which includes such employer.
For purposes of this paragraph, subparagraphs (A) and (B) shall not apply to any loan which, but for such subparagraphs, would be a securities acquisition loan if such loan was not originated by the employer of any employees who are covered by the plan or by any member of the controlled group of corporations which includes such employer, except that this section shall not apply to any interest received on such loan during such time as such loan is held by such employer (or any member of such controlled group).
(3)
A loan to a corporation shall not fail to be treated as a securities acquisition loan merely because the proceeds of such loan are lent to an employee stock ownership plan sponsored by such corporation (or by any member of the controlled group of corporations which includes such corporation) if such loan includes—
(A) repayment terms which are substantially similar to the terms of the loan of such corporation from a lender described in subsection (a), or
(B) repayment terms providing for more rapid repayment of principal or interest on such loan, but only if allocations under the plan attributable to such repayment do not discriminate in favor of highly compensated employees (within the meaning of section 414(q)).
(4)
For purposes of this paragraph, the term "controlled group of corporations" has the meaning given such term by section 409(l)(4).
(5)
The term "securities acquisition loan" shall include any loan which—
(A) is (or is part of a series of loans) used to refinance a loan described in subparagraph (A) or (B) of paragraph (1), and
(B) meets the requirements of paragraphs (2) and (3).
(6)
(A)
A loan shall not be treated as a securities acquisition loan for purposes of this section unless, immediately after the acquisition or transfer referred to in subparagraph (A) or (B) of paragraph (1), respectively, the employee stock ownership plan owns more than 50 percent of—
(i) each class of outstanding stock of the corporation issuing the employer securities, or
(ii) the total value of all outstanding stock of the corporation.
(B)
(i)
Subsection (a) shall not apply to any interest received with respect to a securities acquisition loan which is allocable to any period during which the employee stock ownership plan does not own stock meeting the requirements of subparagraph (A).
(ii)
To the extent provided by the Secretary, clause (i) shall not apply to any period if, within 90 days of the first date on which the failure occurred (or such longer period not in excess of 180 days as the Secretary may prescribe), the plan acquires stock which results in its meeting the requirements of subparagraph (A).
(C)
For purposes of subparagraph (A)—
(i)
The term "stock" means stock other than stock described in section 1504(a)(4).
(ii)
The Secretary may provide that warrants, options, contracts to acquire stock, convertible debt interests and other similar interests be treated as stock for 1 or more purposes under subparagraph (A).
(D)
For purposes of determining whether the requirements of subparagraph (A) are met, an employee stock ownership plan shall be treated as owning stock in the corporation issuing the employer securities which is held by any other employee stock ownership plan which is maintained by—
(i) the employer maintaining the plan, or
(ii) any member of a controlled group of corporations (within the meaning of section 409(l)(4)) of which the employer described in clause (i) is a member.
(7)
A loan shall not be treated as a securities acquisition loan for purposes of this section unless—
(A) the employee stock ownership plan meets the requirements of section 409(e)(2) with respect to all employer securities acquired by, or transferred to, the plan in connection with such loan (without regard to whether or not the employer has a registration-type class of securities), and
(B) no stock described in section 409(l)(3) is acquired by, or transferred to, the plan in connection with such loan unless—
(i) such stock has voting rights equivalent to the stock to which it may be converted, and
(ii) the requirements of subparagraph (A) are met with respect to such voting rights.
(c)
For purposes of this section, the term "employee stock ownership plan" has the meaning given to such term by section 4975(e)(7).
(d)
In applying section 483 and subpart A of part V of subchapter P to any obligation to which this section applies, appropriate adjustments shall be made to the applicable Federal rate to take into account the exclusion under subsection (a).
(e)
(1)
In the case of—
(A) an original securities acquisition loan, and
(B) any securities acquisition loan (or series of such loans) used to refinance the original securities acquisition loan,
subsection (a) shall apply only to interest accruing during the excludable period with respect to the original securities acquisition loan.
(2)
For purposes of this subsection, the term "excludable period" means, with respect to any original securities acquisition loan—
(A)
The 7-year period beginning on the date of such loan.
(B)
If the term of an original securities acquisition loan described in subsection (b)(1)(A) is greater than 7 years, the term of such loan. This subparagraph shall not apply to a loan described in subsection (b)(3)(B).
(3)
For the purposes of this subsection, the term "original securities acquisition loan" means a securities acquisition loan described in subparagraph (A) or (B) of subsection (b)(1).
Prior Provisions
A prior section 133 was renumbered
Effective Date of Repeal
Section 1602(c) of
"(1)
"(2)
"(A) the refinancing loans meet the requirements of section 133 of such Code (as so in effect),
"(B) immediately after the refinancing the principal amount of the loan resulting from the refinancing does not exceed the principal amount of the refinanced loan (immediately before the refinancing), and
"(C) the term of such refinancing loan does not extend beyond the last day of the term of the original securities acquisition loan.
For purposes of this paragraph, the term 'securities acquisition loan' includes a loan from a corporation to an employee stock ownership plan described in section 133(b)(3) of such Code (as so in effect).
"(3)
§134. Certain military benefits
(a) General rule
Gross income shall not include any qualified military benefit.
(b) Qualified military benefit
For purposes of this section—
(1) In general
The term "qualified military benefit" means any allowance or in-kind benefit (other than personal use of a vehicle) which—
(A) is received by any member or former member of the uniformed services of the United States or any dependent of such member by reason of such member's status or service as a member of such uniformed services, and
(B) was excludable from gross income on September 9, 1986, under any provision of law, regulation, or administrative practice which was in effect on such date (other than a provision of this title).
(2) No other benefit to be excludable except as provided by this title
Notwithstanding any other provision of law, no benefit shall be treated as a qualified military benefit unless such benefit—
(A) is a benefit described in paragraph (1), or
(B) is excludable from gross income under this title without regard to any provision of law which is not contained in this title and which is not contained in a revenue Act.
(3) Limitations on modifications
(A) In general
Except as provided in subparagraphs (B) and (C) and paragraphs (4) and (5), no modification or adjustment of any qualified military benefit after September 9, 1986, shall be taken into account.
(B) Exception for certain adjustments to cash benefits
Subparagraph (A) shall not apply to any adjustment to any qualified military benefit payable in cash which—
(i) is pursuant to a provision of law or regulation (as in effect on September 9, 1986), and
(ii) is determined by reference to any fluctuation in cost, price, currency, or other similar index.
(C) Exception for death gratuity adjustments made by law
Subparagraph (A) shall not apply to any adjustment to the amount of death gratuity payable under
(4) Clarification of certain benefits
For purposes of paragraph (1), such term includes any dependent care assistance program (as in effect on the date of the enactment of this paragraph) for any individual described in paragraph (1)(A).
(5) Travel benefits under operation hero miles
The term "qualified military benefit" includes a travel benefit provided under
(6) Certain State payments
The term "qualified military benefit" includes any bonus payment by a State or political subdivision thereof to any member or former member of the uniformed services of the United States or any dependent of such member only by reason of such member's service in an 1 combat zone (as defined in section 112(c)(2), determined without regard to the parenthetical).
(Added
References in Text
The date of the enactment of this paragraph, referred to in subsec. (b)(4), is the date of enactment of
The date of the enactment of this paragraph, referred to in subsec. (b)(5), is the date of enactment of
Prior Provisions
A prior section 134 was renumbered
Amendments
2008—Subsec. (b)(6).
2004—Subsec. (b)(3)(A).
Subsec. (b)(5).
2003—Subsec. (b)(3)(A).
Subsec. (b)(3)(C).
Subsec. (b)(4).
1988—Subsec. (b)(1).
Subsec. (b)(1)(B).
Subsec. (b)(3)(A).
Effective Date of 2008 Amendment
Effective Date of 2004 Amendment
Effective Date of 2003 Amendment
Effective Date of 1988 Amendment
Section 1011B(f)(2)(B) of
Amendment by section 1011B(f)(1), (3) of
Effective Date
Section 1168(c) of
No Inference To Be Drawn From Amendment by Pub. L. 108–121
1 So in original. Probably should be "a".
§135. Income from United States savings bonds used to pay higher education tuition and fees
(a) General rule
In the case of an individual who pays qualified higher education expenses during the taxable year, no amount shall be includible in gross income by reason of the redemption during such year of any qualified United States savings bond.
(b) Limitations
(1) Limitation where redemption proceeds exceed higher education expenses
(A) In general
If—
(i) the aggregate proceeds of qualified United States savings bonds redeemed by the taxpayer during the taxable year exceed
(ii) the qualified higher education expenses paid by the taxpayer during such taxable year,
the amount excludable from gross income under subsection (a) shall not exceed the applicable fraction of the amount excludable from gross income under subsection (a) without regard to this subsection.
(B) Applicable fraction
For purposes of subparagraph (A), the term "applicable fraction" means the fraction the numerator of which is the amount described in subparagraph (A)(ii) and the denominator of which is the amount described in subparagraph (A)(i).
(2) Limitation based on modified adjusted gross income
(A) In general
If the modified adjusted gross income of the taxpayer for the taxable year exceeds $40,000 ($60,000 in the case of a joint return), the amount which would (but for this paragraph) be excludable from gross income under subsection (a) shall be reduced (but not below zero) by the amount which bears the same ratio to the amount which would be so excludable as such excess bears to $15,000 ($30,000 in the case of a joint return).
(B) Inflation adjustment
In the case of any taxable year beginning in a calendar year after 1990, the $40,000 and $60,000 amounts contained in subparagraph (A) shall be increased by an amount equal to—
(i) such dollar amount, multiplied by
(ii) the cost-of-living adjustment under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 1989" for "calendar year 1992" in subparagraph (B) thereof.
(C) Rounding
If any amount as adjusted under subparagraph (B) is not a multiple of $50, such amount shall be rounded to the nearest multiple of $50 (or if such amount is a multiple of $25, such amount shall be rounded to the next highest multiple of $50).
(c) Definitions
For purposes of this section—
(1) Qualified United States savings bond
The term "qualified United States savings bond" means any United States savings bond issued—
(A) after December 31, 1989,
(B) to an individual who has attained age 24 before the date of issuance, and
(C) at discount under
(2) Qualified higher education expenses
(A) In general
The term "qualified higher education expenses" means tuition and fees required for the enrollment or attendance of—
(i) the taxpayer,
(ii) the taxpayer's spouse, or
(iii) any dependent of the taxpayer with respect to whom the taxpayer is allowed a deduction under section 151,
at an eligible educational institution.
(B) Exception for education involving sports, etc.
Such term shall not include expenses with respect to any course or other education involving sports, games, or hobbies other than as part of a degree program.
(C) Contributions to qualified tuition program and Coverdell education savings accounts
Such term shall include any contribution to a qualified tuition program (as defined in section 529) on behalf of a designated beneficiary (as defined in such section), or to a Coverdell education savings account (as defined in section 530) on behalf of an account beneficiary, who is an individual described in subparagraph (A); but there shall be no increase in the investment in the contract for purposes of applying section 72 by reason of any portion of such contribution which is not includible in gross income by reason of this subparagraph.
(3) Eligible educational institution
The term "eligible educational institution" has the meaning given such term by section 529(e)(5).
(4) Modified adjusted gross income
The term "modified adjusted gross income" means the adjusted gross income of the taxpayer for the taxable year determined—
(A) without regard to this section and sections 137, 199, 221, 222, 911, 931, and 933, and
(B) after the application of sections 86, 469, and 219.
(d) Special rules
(1) Adjustment for certain scholarships and veterans benefits
The amount of qualified higher education expenses otherwise taken into account under subsection (a) with respect to the education of an individual shall be reduced (before the application of subsection (b)) by the sum of the amounts received with respect to such individual for the taxable year as—
(A) a qualified scholarship which under section 117 is not includable in gross income,
(B) an educational assistance allowance under
(C) a payment (other than a gift, bequest, devise, or inheritance within the meaning of section 102(a)) for educational expenses, or attributable to attendance at an eligible educational institution, which is exempt from income taxation by any law of the United States, or
(D) a payment, waiver, or reimbursement of qualified higher education expenses under a qualified tuition program (within the meaning of section 529(b)).
(2) Coordination with other higher education benefits
The amount of the qualified higher education expenses otherwise taken into account under subsection (a) with respect to the education of an individual shall be reduced (before the application of subsection (b)) by—
(A) the amount of such expenses which are taken into account in determining the credit allowed to the taxpayer or any other person under section 25A with respect to such expenses; and
(B) the amount of such expenses which are taken into account in determining the exclusions under sections 529(c)(3)(B) and 530(d)(2).
(3) No exclusion for married individuals filing separate returns
If the taxpayer is a married individual (within the meaning of section 7703), this section shall apply only if the taxpayer and his spouse file a joint return for the taxable year.
(4) Regulations
The Secretary may prescribe such regulations as may be necessary or appropriate to carry out this section, including regulations requiring record keeping and information reporting.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Amendment of Section
For termination of amendment by section 901 of
Prior Provisions
A prior section 135 was renumbered
Amendments
2004—Subsec. (c)(4)(A).
2001—Subsec. (c)(2)(C).
Subsec. (c)(4)(A).
Subsec. (d)(1)(D).
Subsec. (d)(2)(A).
Subsec. (d)(2)(B).
1998—Subsec. (c)(2)(C).
Subsec. (c)(3).
"(A) an institution described in section 1201(a) or subparagraph (C) or (D) of section 481(a)(1) of the Higher Education Act of 1965 (as in effect on October 21, 1988), and
"(B) an area vocational education school (as defined in subparagraph (C) or (D) of section 521(3) of the Carl D. Perkins Vocational Education Act) which is in any State (as defined in section 521(27) of such Act), as such sections are in effect on October 21, 1988."
Subsec. (c)(4)(A).
Subsec. (d)(2).
1997—Subsec. (c)(2)(C).
Subsec. (d)(2) to (4).
1996—Subsec. (b)(2)(B)(ii).
Subsec. (c)(4)(A).
Subsec. (d)(1)(D).
1990—Subsec. (b)(2)(B).
Subsec. (b)(2)(B)(ii).
Subsec. (b)(2)(C).
1989—Subsec. (d)(1).
Effective Date of 2004 Amendment
Amendment by
Effective and Termination Dates of 2001 Amendments
Amendment by
Amendment by section 401(g)(2)(B) of
Amendment by section 402(a)(4)(A), (B), (b)(2)(A) of
Amendment by section 431(c)(1) of
Amendment by sections 401(g)(2)(B) and 431(c)(1) of
Effective Date of 1998 Amendments
Amendment by
Amendment by
Effective Date of 1997 Amendment
Amendment by section 201(d) of
Amendment by section 211(c) of
Amendment by section 213(e)(2) of
Effective Date of 1996 Amendment
Amendment by section 1703(d) of
Amendment by section 1806(b)(1) of
Amendment by section 1807(c)(2) of
Effective Date of 1990 Amendment
Amendment by section 11101(d)(1)(E) of
Amendment by section 11702(h) of
Effective Date of 1989 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1989, see section 6009(d) of
Promotion of Public Awareness of Program
Section 6009(b) of
Parental Assistance With Tuition Stamp Study
Section 6009(e) of
§136. Energy conservation subsidies provided by public utilities
(a) Exclusion
Gross income shall not include the value of any subsidy provided (directly or indirectly) by a public utility to a customer for the purchase or installation of any energy conservation measure.
(b) Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed for, or by reason of, any expenditure to the extent of the amount excluded under subsection (a) for any subsidy which was provided with respect to such expenditure. The adjusted basis of any property shall be reduced by the amount excluded under subsection (a) which was provided with respect to such property.
(c) Energy conservation measure
(1) In general
For purposes of this section, the term "energy conservation measure" means any installation or modification primarily designed to reduce consumption of electricity or natural gas or to improve the management of energy demand with respect to a dwelling unit.
(2) Other definitions
For purposes of this subsection—
(A) Dwelling unit
The term "dwelling unit" has the meaning given such term by section 280A(f)(1).
(B) Public utility
The term "public utility" means a person engaged in the sale of electricity or natural gas to residential, commercial, or industrial customers for use by such customers. For purposes of the preceding sentence, the term "person" includes the Federal Government, a State or local government or any political subdivision thereof, or any instrumentality of any of the foregoing.
(d) Exception
This section shall not apply to any payment to or from a qualified cogeneration facility or qualifying small power production facility pursuant to section 210 of the Public Utility Regulatory Policy Act of 1978.
(Added
References in Text
Section 210 of the Public Utility Regulatory Policy Act of 1978, referred to in subsec. (d), probably means section 210 of the Public Utility Regulatory Policies Act of 1978,
Prior Provisions
A prior section 136 was renumbered
Amendments
1996—Subsec. (a).
Subsec. (c)(1).
"(A) with respect to a dwelling unit, and
"(B) on or after January 1, 1995, with respect to property other than dwelling units.
The purchase and installation of specially defined energy property shall be treated as an energy conservation measure described in subparagraph (B)."
Subsec. (c)(2).
Effective Date of 1996 Amendment
Section 1617(c) of
Effective Date
Section 1912(c) of
§137. Adoption assistance programs
(a) Exclusion
(1) In general
Gross income of an employee does not include amounts paid or expenses incurred by the employer for qualified adoption expenses in connection with the adoption of a child by an employee if such amounts are furnished pursuant to an adoption assistance program.
(2) $13,170 exclusion for adoption of child with special needs regardless of expenses
In the case of an adoption of a child with special needs which becomes final during a taxable year, the qualified adoption expenses with respect to such adoption for such year shall be increased by an amount equal to the excess (if any) of $13,170 over the actual aggregate qualified adoption expenses with respect to such adoption during such taxable year and all prior taxable years.
(b) Limitations
(1) Dollar limitation
The aggregate of the amounts paid or expenses incurred which may be taken into account under subsection (a) for all taxable years with respect to the adoption of a child by the taxpayer shall not exceed $13,170.
(2) Income limitation
The amount excludable from gross income under subsection (a) for any taxable year shall be reduced (but not below zero) by an amount which bears the same ratio to the amount so excludable (determined without regard to this paragraph but with regard to paragraph (1)) as—
(A) the amount (if any) by which the taxpayer's adjusted gross income exceeds $150,000, bears to
(B) $40,000.
(3) Determination of adjusted gross income
For purposes of paragraph (2), adjusted gross income shall be determined—
(A) without regard to this section and sections 199, 221, 222, 911, 931, and 933, and
(B) after the application of sections 86, 135, 219, and 469.
(c) Adoption assistance program
For purposes of this section, an adoption assistance program is a separate written plan of an employer for the exclusive benefit of such employer's employees—
(1) under which the employer provides such employees with adoption assistance, and
(2) which meets requirements similar to the requirements of paragraphs (2), (3), (5), and (6) of section 127(b).
An adoption reimbursement program operated under
(d) Qualified adoption expenses
For purposes of this section, the term "qualified adoption expenses" has the meaning given such term by section 36C(d) (determined without regard to reimbursements under this section).
(e) Certain rules to apply
Rules similar to the rules of subsections (e), (f), and (g) of section 36C shall apply for purposes of this section.
(f) Adjustments for inflation
(1) Dollar limitations
In the case of a taxable year beginning after December 31, 2010, each of the dollar amounts in subsections (a)(2) and (b)(1) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2009" for "calendar year 1992" in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.
(2) Income limitation
In the case of a taxable year beginning after December 31, 2002, the dollar amount in subsection (b)(2)(A) shall be increased by an amount equal to—
(A) such dollar amount, multiplied by
(B) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting "calendar year 2001" for "calendar year 1992" in subparagraph 1 thereof.
If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10.
(Added
Inflation Adjusted Items for Certain Years
For inflation adjustment of certain items in this section, see Revenue Procedures listed in a table under
Amendment of Section
For termination of amendment by section 10909(c) of
For termination of amendment by section 901 of
Prior Provisions
A prior section 137 was renumbered
Amendments
2010—Subsec. (a)(2).
Subsec. (b)(1).
Subsec. (d).
Subsec. (e).
Subsec. (f).
"(1) such dollar amount, multiplied by
"(2) the cost-of-living adjustment determined under section 1(f)(3) for the calendar year in which the taxable year begins, determined by substituting 'calendar year 2001' for 'calendar year 1992' in subparagraph (B) thereof.
If any amount as increased under the preceding sentence is not a multiple of $10, such amount shall be rounded to the nearest multiple of $10."
2004—Subsec. (b)(1).
Subsec. (b)(3)(A).
2002—Subsec. (a).
"(1) in the case of an adoption of a child other than a child with special needs, the amount of the qualified adoption expenses paid or incurred by the taxpayer, and
"(2) in the case of an adoption of a child with special needs, $10,000."
Subsec. (b)(1).
Subsec. (f).
2001—Subsec. (a).
Subsec. (b)(1).
Subsec. (b)(2)(A).
Subsec. (b)(3)(A).
Subsec. (f).
1998—Subsec. (b)(3)(A).
1997—Subsec. (b)(1).
Effective and Termination Dates of 2010 Amendment
Amendment by
Amendment by
Effective Date of 2004 Amendments
Amendment by
Amendment by
Effective Date of 2002 Amendment
Amendment by section 411(c)(2) of
Amendment by section 418(a)(2) of
Effective and Termination Dates of 2001 Amendment
Amendment by section 202(b)(1)(B), (2)(B), (d)(2), (e)(2) of
Amendment by section 202(a)(2) of
Amendment by section 431(c)(1) of
Amendment by
Effective Date of 1998 Amendment
Amendment by
Effective Date of 1997 Amendment
Amendment by
Effective Date
Section applicable to taxable years beginning after Dec. 31, 1996, see section 1807(e) of
Transfer of Functions
For transfer of authorities, functions, personnel, and assets of the Coast Guard, including the authorities and functions of the Secretary of Transportation relating thereto, to the Department of Homeland Security, and for treatment of related references, see
1 So in original. Probably should be followed by "(B)".
§138. Medicare Advantage MSA
(a) Exclusion
Gross income shall not include any payment to the Medicare Advantage MSA of an individual by the Secretary of Health and Human Services under part C of title XVIII of the Social Security Act.
(b) Medicare Advantage MSA
For purposes of this section, the term "Medicare Advantage MSA" means an Archer MSA (as defined in section 220(d))—
(1) which is designated as a Medicare Advantage MSA,
(2) with respect to which no contribution may be made other than—
(A) a contribution made by the Secretary of Health and Human Services pursuant to part C of title XVIII of the Social Security Act, or
(B) a trustee-to-trustee transfer described in subsection (c)(4),
(3) the governing instrument of which provides that trustee-to-trustee transfers described in subsection (c)(4) may be made to and from such account, and
(4) which is established in connection with an MSA plan described in section 1859(b)(3) of the Social Security Act.
(c) Special rules for distributions
(1) Distributions for qualified medical expenses
In applying section 220 to a Medicare Advantage MSA—
(A) qualified medical expenses shall not include amounts paid for medical care for any individual other than the account holder, and
(B) section 220(d)(2)(C) shall not apply.
(2) Penalty for distributions from Medicare Advantage MSA not used for qualified medical expenses if minimum balance not maintained
(A) In general
The tax imposed by this chapter for any taxable year in which there is a payment or distribution from a Medicare Advantage MSA which is not used exclusively to pay the qualified medical expenses of the account holder shall be increased by 50 percent of the excess (if any) of—
(i) the amount of such payment or distribution, over
(ii) the excess (if any) of—
(I) the fair market value of the assets in such MSA as of the close of the calendar year preceding the calendar year in which the taxable year begins, over
(II) an amount equal to 60 percent of the deductible under the Medicare Advantage MSA plan covering the account holder as of January 1 of the calendar year in which the taxable year begins.
Section 220(f)(4) shall not apply to any payment or distribution from a Medicare Advantage MSA.
(B) Exceptions
Subparagraph (A) shall not apply if the payment or distribution is made on or after the date the account holder—
(i) becomes disabled within the meaning of section 72(m)(7), or
(ii) dies.
(C) Special rules
For purposes of subparagraph (A)—
(i) all Medicare Advantage MSAs of the account holder shall be treated as 1 account,
(ii) all payments and distributions not used exclusively to pay the qualified medical expenses of the account holder during any taxable year shall be treated as 1 distribution, and
(iii) any distribution of property shall be taken into account at its fair market value on the date of the distribution.
(3) Withdrawal of erroneous contributions
Section 220(f)(2) and paragraph (2) of this subsection shall not apply to any payment or distribution from a Medicare Advantage MSA to the Secretary of Health and Human Services of an erroneous contribution to such MSA and of the net income attributable to such contribution.
(4) Trustee-to-trustee transfers
Section 220(f)(2) and paragraph (2) of this subsection shall not apply to any trustee-to-trustee transfer from a Medicare Advantage MSA of an account holder to another Medicare Advantage MSA of such account holder.
(d) Special rules for treatment of account after death of account holder
In applying section 220(f)(8)(A) to an account which was a Medicare Advantage MSA of a decedent, the rules of section 220(f) shall apply in lieu of the rules of subsection (c) of this section with respect to the spouse as the account holder of such Medicare Advantage MSA.
(e) Reports
In the case of a Medicare Advantage MSA, the report under section 220(h)—
(1) shall include the fair market value of the assets in such Medicare Advantage MSA as of the close of each calendar year, and
(2) shall be furnished to the account holder—
(A) not later than January 31 of the calendar year following the calendar year to which such reports relate, and
(B) in such manner as the Secretary prescribes in such regulations.
(f) Coordination with limitation on number of taxpayers having Archer MSAs
Subsection (i) of section 220 shall not apply to an individual with respect to a Medicare Advantage MSA, and Medicare Advantage MSAs shall not be taken into account in determining whether the numerical limitations under section 220(j) are exceeded.
(Added
References in Text
The Social Security Act, referred to in subsecs. (a) and (b)(2)(A), is act Aug. 14, 1935, ch. 531,
Prior Provisions
A prior section 138 was renumbered
Amendments
2004—
Subsec. (c)(2)(C)(i).
Subsec. (f).
2000—Subsec. (b).
Subsec. (f).
Effective Date
Section 4006(c) of
§139. Disaster relief payments
(a) General rule
Gross income shall not include any amount received by an individual as a qualified disaster relief payment.
(b) Qualified disaster relief payment defined
For purposes of this section, the term "qualified disaster relief payment" means any amount paid to or for the benefit of an individual—
(1) to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a qualified disaster,
(2) to reimburse or pay reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence or repair or replacement of its contents to the extent that the need for such repair, rehabilitation, or replacement is attributable to a qualified disaster,
(3) by a person engaged in the furnishing or sale of transportation as a common carrier by reason of the death or personal physical injuries incurred as a result of a qualified disaster, or
(4) if such amount is paid by a Federal, State, or local government, or agency or instrumentality thereof, in connection with a qualified disaster in order to promote the general welfare,
but only to the extent any expense compensated by such payment is not otherwise compensated for by insurance or otherwise.
(c) Qualified disaster defined
For purposes of this section, the term "qualified disaster" means—
(1) a disaster which results from a terroristic or military action (as defined in section 692(c)(2)),
(2) federally 1 declared disaster (as defined by section 165(h)(3)(C)(i)),
(3) a disaster which results from an accident involving a common carrier, or from any other event, which is determined by the Secretary to be of a catastrophic nature, or
(4) with respect to amounts described in subsection (b)(4), a disaster which is determined by an applicable Federal, State, or local authority (as determined by the Secretary) to warrant assistance from the Federal, State, or local government or agency or instrumentality thereof.
(d) Coordination with employment taxes
For purposes of
(e) No relief for certain individuals
Subsections (a), (f), and (g) shall not apply with respect to any individual identified by the Attorney General to have been a participant or conspirator in a terroristic action (as so defined), or a representative of such individual.
(f) Exclusion of certain additional payments
Gross income shall not include any amount received as payment under section 406 of the Air Transportation Safety and System Stabilization Act.
(g) Qualified disaster mitigation payments
(1) In general
Gross income shall not include any amount received as a qualified disaster mitigation payment.
(2) Qualified disaster mitigation payment defined
For purposes of this section, the term "qualified disaster mitigation payment" means any amount which is paid pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (as in effect on the date of the enactment of this subsection) or the National Flood Insurance Act (as in effect on such date) to or for the benefit of the owner of any property for hazard mitigation with respect to such property. Such term shall not include any amount received for the sale or disposition of any property.
(3) No increase in basis
Notwithstanding any other provision of this subtitle, no increase in the basis or adjusted basis of any property shall result from any amount excluded under this subsection with respect to such property.
(h) Denial of double benefit
Notwithstanding any other provision of this subtitle, no deduction or credit shall be allowed (to the person for whose benefit a qualified disaster relief payment or qualified disaster mitigation payment is made) for, or by reason of, any expenditure to the extent of the amount excluded under this section with respect to such expenditure.
(Added
References in Text
Section 406 of the Air Transportation Safety and System Stabilization Act, referred to in subsec. (f), is section 406 of
The Robert T. Stafford Disaster Relief and Emergency Assistance Act, referred to in subsec. (g)(2), is
The date of the enactment of this subsection, referred to in subsec. (g)(2), is the date of enactment of
The National Flood Insurance Act, referred to in subsec. (g)(2), probably means the National Flood Insurance Act of 1968, title XIII of
Prior Provisions
A prior section 139 was renumbered
Amendments
2008—Subsec. (c)(2).
2005—Subsec. (d).
Subsec. (e).
Subsecs. (g), (h).
Effective Date of 2008 Amendment
Amendment by
Effective Date of 2005 Amendment
Effective Date
1 So in original. Probably should be preceded by "a".
§139A. Federal subsidies for prescription drug plans
Gross income shall not include any special subsidy payment received under section 1860D–22 of the Social Security Act. This section shall not be taken into account for purposes of determining whether any deduction is allowable with respect to any cost taken into account in determining such payment.
(Added
Amendment of Section
References in Text
Section 1860D–22 of the Social Security Act, referred to in text, is classified to
Effective Date of 2010 Amendment
Effective Date
Section applicable to taxable years ending after Dec. 8, 2003, see section 1202(d) of
§139B. Benefits provided to volunteer firefighters and emergency medical responders
(a) In general
In the case of any member of a qualified volunteer emergency response organization, gross income shall not include—
(1) any qualified State and local tax benefit, and
(2) any qualified payment.
(b) Denial of double benefits
In the case of any member of a qualified volunteer emergency response organization—
(1) the deduction under 164 shall be determined with regard to any qualified State and local tax benefit, and
(2) expenses paid or incurred by the taxpayer in connection with the performance of services as such a member shall be taken into account under section 170 only to the extent such expenses exceed the amount of any qualified payment excluded from gross income under subsection (a).
(c) Definitions
For purposes of this section—
(1) Qualified State and local tax benefit
The term "qualified state and local tax benefit" means any reduction or rebate of a tax described in paragraph (1), (2), or (3) of section 164(a) provided by a State or political division thereof on account of services performed as a member of a qualified volunteer emergency response organization.
(2) Qualified payment
(A) In general
The term "qualified payment" means any payment (whether reimbursement or otherwise) provided by a State or political division thereof on account of the performance of services as a member of a qualified volunteer emergency response organization.
(B) Applicable dollar limitation
The amount determined under subparagraph (A) for any taxable year shall not exceed $30 multiplied by the number of months during such year that the taxpayer performs such services.
(3) Qualified volunteer emergency response organization
The term "qualified volunteer emergency response organization" means any volunteer organization—
(A) which is organized and operated to provide firefighting or emergency medical services for persons in the State or political subdivision, as the case may be, and
(B) which is required (by written agreement) by the State or political subdivision to furnish firefighting or emergency medical services in such State or political subdivision.
(d) Termination
This section shall not apply with respect to taxable years beginning after December 31, 2010.
(Added
Effective Date
§139C. COBRA premium assistance
In the case of an assistance eligible individual (as defined in section 3001 of title III of division B of the American Recovery and Reinvestment Act of 2009), gross income does not include any premium reduction provided under subsection (a) of such section.
(Added
References in Text
Section 3001 of title III of division B of the American Recovery and Reinvestment Act of 2009, referred to in text, is section 3001 of
Amendments
2010—
Effective Date of 2010 Amendment
Amendment by
Effective Date
Section applicable to taxable years ending after Feb. 17, 2009, see section 3001(a)(15)(C) of
§139D.1 Free choice vouchers
Gross income shall not include the amount of any free choice voucher provided by an employer under section 10108 of the Patient Protection and Affordable Care Act to the extent that the amount of such voucher does not exceed the amount paid for a qualified health plan (as defined in section 1301 of such Act) by the taxpayer.
(Added
References in Text
Section 10108 of the Patient Protection and Affordable Care Act, referred to in text, is section 10108 of
Section 1301 of the Patient Protection and Affordable Care Act, referred to in text, is classified to
Effective Date
1 Another section 139D is set out following this section.
§139D.1 Indian health care benefits
(a) General rule
Except as otherwise provided in this section, gross income does not include the value of any qualified Indian health care benefit.
(b) Qualified Indian health care benefit
For purposes of this section, the term "qualified Indian health care benefit" means—
(1) any health service or benefit provided or purchased, directly or indirectly, by the Indian Health Service through a grant to or a contract or compact with an Indian tribe or tribal organization, or through a third-party program funded by the Indian Health Service,
(2) medical care provided or purchased by, or amounts to reimburse for such medical care provided by, an Indian tribe or tribal organization for, or to, a member of an Indian tribe, including a spouse or dependent of such a member,
(3) coverage under accident or health insurance (or an arrangement having the effect of accident or health insurance), or an accident or health plan, provided by an Indian tribe or tribal organization for medical care to a member of an Indian tribe, include a spouse or dependent of such a member, and
(4) any other medical care provided by an Indian tribe or tribal organization that supplements, replaces, or substitutes for a program or service relating to medical care provided by the Federal government to Indian tribes or members of such a tribe.
(c) Definitions
For purposes of this section—
(1) Indian tribe
The term "Indian tribe" has the meaning given such term by section 45A(c)(6).
(2) Tribal organization
The term "tribal organization" has the meaning given such term by section 4(l) of the Indian Self-Determination and Education Assistance Act.
(3) Medical care
The term "medical care" has the same meaning as when used in section 213.
(4) Accident or health insurance; accident or health plan
The terms "accident or health insurance" and "accident or health plan" have the same meaning as when used in section 105.
(5) Dependent
The term "dependent" has the meaning given such term by section 152, determined without regard to subsections (b)(1), (b)(2), and (d)(1)(B) thereof.
(d) Denial of double benefit
Subsection (a) shall not apply to the amount of any qualified Indian health care benefit which is not includible in gross income of the beneficiary of such benefit under any other provision of this chapter, or to the amount of any such benefit for which a deduction is allowed to such beneficiary under any other provision of this chapter.
(
References in Text
Section 4(l) of the Indian Self-Determination and Education Assistance Act, referred to in subsec. (c)(2), is classified to
Effective Date
No Inference With Respect to Exclusion From Gross Income of Certain Benefits
"(1) benefits provided by an Indian tribe or tribal organization that are not within the scope of this section, and
"(2) benefits provided prior to the date of the enactment of this Act [Mar. 23, 2010]."
1 Another section 139D is set out preceding this section.
§140. Cross references to other Acts
(a) For exemption of—
(1) Allowances and expenditures to meet losses sustained by persons serving the United States abroad, due to appreciation of foreign currencies, see
(2) Amounts credited to the Maritime Administration under section 9(b)(6) of the Merchant Ship Sales Act of 1946, see section 9(c)(1) of that Act (
(3) Benefits under laws administered by the Veterans' Administration, see
(4) Earnings of ship contractors deposited in special reserve funds, see
(5) Income derived from Federal Reserve banks, including capital stock and surplus, see section 7 of the Federal Reserve Act (
(6) Special pensions of persons on Army and Navy medal of honor roll, see
(b) For extension of military income tax-exemption benefits to commissioned officers of Public Health Service in certain circumstances, see section 212 of the Public Health Service Act (
(Aug. 16, 1954, ch. 736,
References in Text
Section 9 of the Merchant Ship Sales Act of 1946 (
Amendments
2006—Subsec. (a)(4).
2002—
1997—
1996—
1992—
1991—Subsec. (a)(3).
Subsec. (a)(6).
1988—
1986—
1984—
Subsec. (a)(6) to (8).
1983—
1981—
1980—Subsec. (a).
Subsec. (a)(8).
1978—
1976—Subsec. (a).
Subsec. (b).
1969—
1966—
1964—
1958—Subsec. (a)(18).
1957—Subsec. (a)(18).
1956—Subsec. (a). Act Aug. 1, 1956, added par. (18) relating to dependency and indemnity compensation.
Change of Name
Reference to Veterans' Administration deemed to refer to Department of Veterans Affairs pursuant to section 10 of
Effective Date of 1984 Amendment
Amendment by section 2661(o)(2) of
Effective Date of 1980 Amendments
Amendment by
Amendment by
Effective Date of 1976 Amendment
Amendment by
Effective Date of 1958 Amendment
Amendment by